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Trade Briefing Paper:
1 0 Reasons to Challenge the Pacific
Agreement on Closer Economic Relations
(PACER-Plus)
Why a free trade agreement with Australia and New Zealand poses dangers for the Pacific
Island Countries
PACER-Plus will lead to business closures and
job losses
PACER-Plus will undermine indigenous rights to
land
Under PACER+ up to 80 per cent of Pacific manufacturing Indigenous peoples across the Pacific Island Countries
would close down, leading to unemployment for
have a distinctive material and spiritual relationship with
thousands of workers. (1 )
their land based on the concept of custodianship. Most
Pacific land is under custom control.
Businesses and industries in the Pacific face considerable
constraints to engage in global business (distance from
Free trade agreements can have implications for
markets, cost of inputs, small economies of scale, lack of indigenous rights and land tenure, particularly if they
human resources). Opening Pacific markets to large,
contain provisions to allow foreign ownership of land. At
established corporations in Australia and NZ may wipe
the World Trade Organisation, the European Union has
them out due to the difficulty in competing with their
previously requested of Papua New Guinea and the
cheaper prices.
Solomon Islands that they remove restrictions on the
ownership of land by foreign companies and investors.
For the Pacific, with few developed businesses, a concern
is not just that PACER+ will wipe out existing businesses, Land in the Pacific is central to life and the custom
but also that it will prevent future establishment of local
processes that determine its usage sit outside the ideas of
businesses and creation of local jobs.
free trade and the corporate interests that want to change
them. A study commissioned by the Pacific Islands Forum
Secretariat found that “possibly the most significant
PACER-Plus will lead to a loss in public services like
conflict between the indigenous peoples of Forum Island
health and education
Public services (like health, education, water, electricity, Countries and regional trade integration arises in the
police and emergency services) are paid for through taxes. economic uses of communally held land and
resources.”(3) Commitments by Pacific countries in
One of the ways Pacific countries collect these taxes is
PACER+ may undermine the decisions and processes for
through a tax on imported goods (often luxury goods).
PACER+ will force Pacific governments to stop collecting determining land usage and control by Pacific Island
these taxes, which means governments will have difficulty communities.
providing public services.
The commitments that governments make relating to how
It is reported that “countries such as the Solomon Islands, companies set up in a country will have far reaching and
Cooks, FSM, Niue and Nauru could lose between five to unforeseen impacts on land management. For example
ten per cent of their recurrent revenue” and “for about half some countries, due to what they may or may not have
planned on committing, can see them unable to prevent
the Pacific, including Samoa, Vanuatu, Tonga, Kiribati,
an investment in ecologically or culturally sensitive areas,
RMI and Tuvalu full trade liberalisation would present a
restrict the amount of land leased by foreigners for
major fiscal challenge as the adjustments would be
hunting, agriculture etc, or restrict the number or location
between ten and thirty per cent of revenue.”(2)
of waste/toxic dumps. All of these land-usage issues come
in to play when the rights of communities and land
Pacific governments may be forced to raise revenue by
stewards conflict with the commitments made in free
increasing Value-Added Taxes - a method that taxes all
trade agreements
equally regardless of how much someone earns. VATs
have been shown to only recoup 30% of the revenue lost
Pacific governments must be very wary of any Services
through cuts to import taxes meaning that Pacific
governments will be unable to fund essential services. All and Investment chapters in PACER+ that could undermine
indigenous Pacific rights to land. The negotiating texts
this whilst Australiana and NZ exports gain from lower
must be made public to ensure informed discussion about
taxes on them.
these crucial impacts.
www.pang.org.fj
the cities and towns, but not extend these services to rural
areas or outer islands. This is especially a concern in the
Pacific, where in some countries, there are no regulations
Free trade agreements restrict the ability of governments to in place to ensure everyone has a right to access these
regulate the activities of foreign businesses interested in
services .
investing, or supplying services, in their countries. Under
PACER+ businesses can complain about government
Further, opening service ‘markets’ can lead to two levels
regulations if they feel they are getting in the way of
of services in the country, where the rich get good services
making profits – and can even take the government to
but most people don’t. Listing health services for
court to demand money in compensation or a change in
example, would allow the building of foreign hospitals,
government policy.
clinics and dental clinics. This leads to an internal ‘brain
drain’, where the most skilled health staff are drawn away
PACER+ will lead to changes in law in the Pacific that will from the public sector (by means of higher pay) leaving
allow Australian and NZ companies to establish new
poor or remote areas without the people they need to run
enterprises (and remove profits) with reduced obligations essential healthcare facilities.
to the countries in which they invest. Pacific governments
will no longer be able to require foreign investors to hire
PACER-Plus will strip Pacific governments of
local workers and managers, to train local workers,
policy options they could use to stimulate
partner with local businesses or use local inputs and
suppliers. Australian and NZ companies will also be able industry and employment
PACER+ will prevent Pacific governments from making
to remove all their profits whenever they like (instead of
policy choices that stimulate Pacific industries and create
re-investing into the local community).
local jobs.
Pacific governments will not be able to introduce new
regulations that are ‘more burdensome than necessary’ – Under PACER+, Pacific governments will not be able to
favour our local companies, or protect them from foreign
that is, burdensome for foreign businesses. This may
competition (from either foreign products or the
include regulations which aim to keep prices low, or
regulations to ensure services are available to everybody establishment of foreign businesses). The reduced ability
to support local business is an erosion of the sovereignty
in the community.
of Pacific governments and peoples. If a cooperative of
landowners wanted to establish new tourism services
PACER-Plus will undermine access to essential local
in a rural area, or on an ‘offshore’ island – which may be
services
important for preventing rural-urban drift, promoting
Services like health, education, water, electricity, post,
culturally sensitive development, and providing
waste management etc are important services that should appropriate sustainable livelihoods for villagers – Pacific
be available to everybody in society. These services play governments may not be able to provide those landowners
a social role, and it’s only recently that they have been
with preferential credit (to build new tourist
thought of as ways to make profit. Some of these services accommodation for example), time-bound tax breaks, or
(like health and education) represent basic human rights, training grants to send young people to hospitality
and under international treaties governments are obliged courses, without extending those same treatments to
to provide these services to everybody at accessible prices. Australian and NZ corporations interested in establishing a
similar enterprise.
PACER+ will require Pacific governments to list service
‘sectors’ – allowing Australian and NZ companies to
Governments will also not be able to regulate investors in
compete to provide these services in the Pacific. This will a way that creates local employment – by requiring new
undermine access to services (especially for vulnerable
investors Australian and NZ investors employ or train local
people, like the unemployed, or the rural poor).
workers. This also extends to requiring the partnering with
local businesses or using domestic inputs such as local
Opening service ‘markets’ allows foreign companies to
foods in hotel restaurants.
pick and choose where they provide services, and who
they provide them to. Companies might provide water,
health, education, or power services to wealthy people in
PACER-Plus will give unprecedented rights to
big corporations
PACER-Plus will lead to more expensive
medicine and education materials
Free trade agreements often include rules regarding
‘intellectual property rights’. These rules protect the
‘rights’ of companies that produce new inventions –
meaning only they are allowed to sell that invention, and
they can sell it for whatever price they like. ‘Inventions’
include things like new medicines and education
materials (like books, magazines and online journals).
Businesses in Australia and NZ want to see tariffs reduced
on their exports to the Pacific, and changes to laws in the
region to allow corporations to establish new enterprises
(and remove profits) with reduced obligations to the
countries in which they invest. Australian and NZ exports
to the region are already worth $AUD5 billion each year,
and an FTA could add to that value considerably.
A 2008 study commissioned by the Australian aid agency
(AusAID) found that PACER+ could increase trade in the
Australia and NZ will want PACER+ to include new rules region by up to 30 per cent. However, that study did not
on intellectual property at least as strong as the rules at the say in which direction that increase in trade would be. As
World Trade Organisation (WTO). The WTO rules grant Pacific countries already have ‘duty-free and quota-free’
pharmaceutical companies 20 years exclusive rights to a access to Australia and NZ markets, it seems that nearly
all of this increase will be an increase in Australian and
patented invention. In countries that have joined the
WTO, drug companies can sell their drugs – without any NZ exports to the Pacific (at the same time as Pacific
competition, and at high prices, for 20 years – even if that industries close and Pacific governments lose much
needed revenue).
means poor people who need those drugs cannot buy
them. In the Pacific, most countries are not members of
An FTA with Australia and NZ offers many gains for
the WTO and so these rules don’t apply. If they were
introduced under PACER+ Pacific governments would not business in those countries, and very few (if any) gains for
be able to import certain cheaper drugs, and would have development in the Pacific – as well as posing very
serious risks.
to buy the expensive ‘protected’ medicine.
If PACER+ contains rules similar to other agreements
Australia and NZ are pursuing around the world, it might
be more difficult for teachers and students in the Pacific to
access education material – by restricting photocopying
and sharing of books and journals, or by restricting access
to information on the internet with digital ‘locks’ on some
information.
Other things that are important for development, like
herbicides and pesticides, or new computer hardware and
software, may also be more expensive if PACER+ contains
rules on intellectual property. PACER+ might even
include new rules that restrict the traditional rights of
farmers to save, re-use, exchange and sell seeds produced
from their harvests!
PACER-Plus offers a lot more for Australia and
NZ than it does for the Pacific
A free trade agreement (FTA) with the Pacific has long
been a dream of Australian and NZ trade officials.
Australia and NZ are interested in securing new access to
Pacific markets for their exporters, service suppliers and
potential new investors.
Australia and New Zealand have not negotiated
in good faith
Recent revelations have detailed how New Zealand has
been spying on Pacific governments with a “full-take
collection” policy. The New Zealand Herald recently
reported that New Zealand spying was included “Pacific
government ministers and senior officials, government
agencies, international organisations and non-government
organisations”(4).
By undertaking complete surveillance and capture of
Pacific government communications means that New
Zealand had access to the sovereign discussions being
made by Pacific governments about negotiating positions
on PACER+. Such surveillance contravenes the
international legal principle of negotiating in good faith
and as such leaves any outcome open to being declared
void on such grounds.
Pacific Islands bearing the costs of an
agreement
industries can compete on the world stage. Certainly all of
the now-developed countries have protected their
industries in the early stages, and only pursued free trade
Under current negotiations Pacific governments are
bearing the costs of PACER+ commitments. This is both in in a cautious and carefully planned manner. Pacific
countries, with relatively few developed industries and
terms of making cuts to import taxes but also in the
firms, are not at a point where open competition with
reduced ability of governments to regulate. Whilst the
developed nations would be wise.
Pacific is wanting to see commitments by Australia and
New Zealand on Labour Mobility (increasing the seasonal
worker programs) and Development Assistance (additional PACER+ was also referred to as a 'development
aid to help implement the agreement), there 'benefits' are agreement' but unfortunately there is little, if anything, of
non-binding, allowing Australia and New Zealand to opt developmental interest to Pacific governments under
PACER+. The Pacific is being asked to forgo its ability to
out whenever they want, something not available to the
shape and determine its own path of development in
commitments made by the Pacific.
return for some possible additional dollars in aid funding
and an increase in seasonal worker programs.
Countries that have opened up their markets to foreign
competition have tended to do so only when their local
This brief was compiled by the Pacific Network on Globalisation (PANG).
PANG is a Pacific regional network promoting economic self-determination
and justice in the Pacific Islands.
For more information:
visit - www.pang.org.fj.
email - [email protected]
facebook - tabupacerplus
twitter - @tabupacerplus
References:
1 ) Dr Wadan Narsey cited in Institute for International Trade (University of Adelaide). 2008. Research Study on the
Benefits, Challenges and Ways Forward for PACER Plus – Final Report. Institute for International Trade, June 2008.
2) Pacific Islands Forum Secretariat. 2007. Responding to the Revenue Consequences of Trade Reforms in the Forum
Island Countries – Final Report. PIFS, November 2007
3) Nathans Associates. Pacific Regional Trade and Economic Cooperation: Joint baseline and gap analysis. Nathans
Associates, December 2007.
4) Hager, N. and Gallagher R. Snowden revelations / The price of the Five Eyes club: Mass spying on friendly nations,
The New Zealand Herald, reported March 5, 201 5, accessed at
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1 &objectid=1 1 41 1 759