The winds of change, so the cliché
goes, are blowing across the Pacific. Yet looking at the background
to two regional trade agreements launched in August makes me think
that sometimes the more things change, the more they stay the same.
When the world's tiniest republic
hosted the 32nd Leaders Summit of the Pacific Islands Forum (formerly
the South Pacific Forum) last month, free trade was on the agenda.
Facing imminent depletion of the high quality phosphate reserves on
which its economy is based, most of Nauru resembles a mined-out moonscape.
Many fear our entire planet may rapidly meet a similar fate due to
the dominant model of "development" that has spread its
tentacles far and wide.
Sri Lankan jurist Christopher
Weeramantry, who chaired a Commission of Inquiry on Nauru, 3000 km
northeast of Australia, concluded that the island's "wealth and
very substance were scattered throughout the world in the form of
cheap fertilisers which helped grow food not only for particular countries
but through them for all the world". Nauru's history until independence
in 1968 was one of colonial exploitation, social and environmental
devastation, and great profits for the British, Australian and New
Zealand governments which jointly administered the island after a
period of German rule. It now faces being wiped off the map by rising
sea levels due to global warming, rising unemployment after the downsizing
of the Government and Nauru Phosphate Corporation which provided 95%
of all employment, and threats of financial sanctions because of European
crackdowns on money laundering and tax haven operations. "Coca-colonisation"
has seen healthier traditional diets displaced by processed foods,
imported mainly from Australia. Nauruans are the world's most diabetes-ridden
Just as forces outside the Pacific
wrought the destruction in Nauru for their own benefit, recent moves
to create a regional free trade area to "ease" the island
nations' "smooth and gradual integration into the world economy"
are being imposed from beyond the islands. Just as the British, French
and German empires divided the Pacific into spheres of influence by
an arbitrary line, the imperial tussles of the 19th century are now
being mirrored by the jockeying of bigger powers to protect their
political and economic interests in the region. Here, the place of
the colonial powers of yesteryear has been taken by the European Union
(EU), Australia, and New Zealand.
Last month, Fiji's former president
Ratu Sir Kamisese Mara forcefully criticised Australia and New Zealand
- the Forum's "metropolitan members." "They have sought
to impose their solutions in an insensitive way, when left to ourselves
we could work things out in what we have come to call the Pacific
"The Forum comes complete
with some crazy maths", writes New Zealand journalist, Michael
Field. "The Marshall Islands has just 181 sq km of land, a third
the size of Singapore, and none of it more than 5m above sea-level,
yet it sits in an exclusive economic zone the size of Greenland. So
small are the states that the populations of five of the smallest
combined would nearly half fill Sydney's Olympic Stadium. Australia,
New Zealand and Papua New Guinea make up 93 per cent of the forum's
population and 99 per cent of the land area".
High-level statements about special
"development challenges" and vulnerabilities faced by developing
small island states are ubiquitous. They're in numerous UN and Commonwealth
Secretariat documents. Former New Zealand politician, WTO Director
General Mike Moore acknowledged "problems of small and vulnerable
countries with scarce resources" in a video link to participants
in a joint Pacific Island Forum/WTO trade policy course held in Fiji
this March. Predictably, he thinks their problems are best addressed
in the context of a new round of WTO talks.
The Asian Development Bank (ADB),
a major multilateral donor in the Pacific, classifies the special
circumstances of Pacific Developing Member Countries to include "smallness,
remoteness from major markets, geographic fragmentation, economic
vulnerability (because of reliance on a narrow range of primary product
exports, aid, and/or remittances), and environmental vulnerability."
The Lome Convention defining the
relations between the EU and the now 77 States of Africa, the Caribbean
and the Pacific (ACP) was initially signed in 1975. Lome combined
a trade regime of preferential access to the European market for ACP
products with a financial and technical aid package. Since the Cold
War, the EU has focused more closely on Eastern Europe and the Mediterranean
while trying to shore up its other international political and economic
Under the Cotonou agreement signed
last year between the EU and ACP, the system of trade preferences
which the EU had granted will gradually be replaced by a series of
new economic partnerships - free trade agreements. Formal negotiations
for these will begin in September 2002, to take effect by January
The ACP Secretariat says Cotonou
was shaped by "the EU's need to restore its credibility as a
'global player' in aid and development" after Seattle and other
events. The WTO had pressured the EU to radically reform Lome's provisions.
Cotonou defines the negotiating framework to enable the regional sub-groups
or individual countries within the ACP and the EU to conclude new
WTO-compatible trade agreements. A major power imbalance has always
underscored EU-ACP trade and economic relations. This can only worsen.
Against a backdrop of pressure
from the EU, Australia and New Zealand, and multilateral financial
institutions like the ADB, in 1999 Forum Island leaders endorsed the
development of a Pacific regional free trade agreement and tasked
the Forum Secretariat to prepare a text. This was closely based on
recommendations of a 1998 report by Robert Scollay, Director of Auckland
University's APEC Study Centre.
Forum Secretary-General Noel Levi
has sought to brand the concept of a regional free trade agreement
as a regional initiative. He claims that the "vision of trade
and economic integration" had been the basis for the Forum's
creation 30 years ago.
However, Fijian activist/academic
Claire Slatter believes that the attempt to market the regional free
trade agreement "as the culmination of a regional dream is aimed
at legitimating the...proposal and engendering region-wide political
support - the idea that regional interests, as opposed to external
ones, are being realised here is intended to create a strong sense
of ownership among Pacific governments. The emergence of discordant
thinking within the South Pacific Forum since 1997, and steadily growing
criticism from NGOs and leaders of other regional institutions and
organisations about the programme of economic restructuring being
undertaken in the region under its direction and leadership, have
made ownership and legitimacy key concerns of the Forum Secretariat
Controversy and tension surrounded
the nature of Australia and New Zealand involvement in any eventual
free trade agreement. New Zealand government documents show that the
Melanesian Spearhead Group countries (Fiji, Papua New Guinea, Solomon
Islands and Vanuatu) and the small island states were concerned at
the impact on small and fragile economies of opening up to competition
from larger countries, and wanted Australia and New Zealand - the
economic heavyweights in the South Pacific - to be separate signatories
to a separate protocol. Australia and New Zealand had sought to be
full participants and parties principal at any negotiations.
So two agreements were approved
at Nauru. The Pacific Agreement on Closer Economic Relations (PACER),
is not a free trade agreement as such but an "umbrella"
framework agreement for future free trade agreements and economic
relations in the region as a whole - including Australia and New Zealand.
It provides for cooperation on trade facilitation and financial and
technical assistance including in the areas of trade facilitation
and promotion, capacity building and structural adjustment. PACER
allows for the start of negotiations of Forum-wide free trade arrangements
no later than 8 years after PICTA enters into force.Should
Forum Island Countries (FICs) wish to start free trade negotiations
with developed countries (like the EU) they must first approach Australia
and New Zealand to make sure they do not miss out. PACER, its proponents
say, supposedly allows for Pacific Island nations to conclude trade
agreements at their own pace. Such statements ignore the fact that
commitments to start free trade negotiations next year with the EU
- thus triggering talks with Australia and New Zealand - have already
PICTA (Pacific Island Countries
Trade Agreement) is a goods-only agreement, which will come into force
after six countries have ratified it. Goods trade liberalisation will
take place among the 14 FICs over an 8-year period to 2010 for developing
countries, and 2012 for Small Island States and Least Developed Countries.
Protection of sensitive industries will be maintained over a longer
period, by country-specific "negative" lists to be eliminated
by 2016. Eventually these agreements can be extended to cover services
and investment liberalisation.
Like Cotonou, the trade arrangements
are presented as "stepping stones" to allow FICs to gradually
become part of a single regional market and integrate into the global
New Zealand government documents
show alarm and indignation about the prospect of being excluded from
a Pacific regional agreement, and the EU clinching a free trade deal
allowing its exports better market access in the Pacific islands than
its own. "We have important trade, economic and investment relations
with the South Pacific."New Zealand
and Australia waged a "concerted effort" to preserve their
interests through the PACER/PICTA package. Both are ardent advocates
of trade and investment liberalisation.
An important objective for Australia
and New Zealand has been to ensure that their trading interests in
Forum Island markets are adequately defended should FICs begin free
trade negotiations with non-Forum partners. Australia and New Zealand
"can accept FICs-only liberalisation as a first step so long
as our situation vis-a-vis third parties is safeguarded." said
New Zealand officials.
The Pacific Islands are a valuable
market for Australia and New Zealand, whose products have long flooded
into the region. For exporting FICs like Fiji and the Solomon Islands,
tariff cuts in Australia effectively spell an end to preferential
trade arrangements that have helped them develop their industries.
Pacific countries, few of which enjoyed preferential access to European
markets in the first place, have no real prospect of gaining further
EU market access. The balance of trade between Australia/New Zealand
and the Pacific Islands has always been unequal. In the year to June
2000, New Zealand received NZ$ 129 million in imports from Forum Island
Countries, while its exports to them totaled $490 million. Australia's
trade with the region is worth A$ 1.5 billion annually.
Many island countries depend greatly
for their government revenue on customs duties. According to a 1998
report tariffs represented 64% of the total tax revenue in Kiribati,
57% in Vanuatu, and 46% in Tuvalu. Value Added Tax or Goods and Services
Tax are being advanced as alternative revenue sources. Social budgets
will be first to feel the pinch.
At Nauru President Tebururo Tito
of Kiribati warned: "Globalisation and economic liberalisation
...may create untameable and unpredictable free market forces. These
forces, in my view, steer the most powerful economies on earth in
a direction that could take humankind back to the sociologists' adaptation
of Darwin's theory of the survival of the fittest where life for the
weak and the poor in the family, village and society is more precarious
than that for the strong and powerful. I believe that this is the
most important ideological challenge for the leaders in our region
over the next decade."
The structural adjustment programmes
applied to the islands will arguably have a much greater impact than
the new trade deals. But these agreements will help to lock in economic
reforms. The EU sees its new agreements acting as an "anchor"
for this purpose.
External pressure to prise open
these small island economies and the region's fragile ecosystem to
the global market smacks of the same callous disregard with which
the Pacific and its peoples have long been treated by Pacific Rim
powers and Europe. Pacific peoples still have little input into the
development of the macroeconomic policies sold to them as the only
Fine words about "special
circumstances" and vulnerabilities of developing small island
states are frequently used to justify external intervention and to
disempower the very countries to which they refer. Such noises of
concern mean little when backed by pressure to conform to economic
policies that have already been tried, tested and failed elsewhere.
Nauru's President Rene Harris
recently warned that failure to address global warming and rising
sea levels would lead to a "modern holocaust" for the Pacific's
low-lying islands. The Pacific certainly doesn't deserve to be locked
into a neoliberal nightmare.