AFTINET submission on Pacific Island trade urges government to acknowledge flaws in PACER Plus and prioritise climate and development issues

Australian government ministers have initiated four separate Parliamentary Inquiries into Australia’s diplomatic, defence and trade relationships with the Pacific Islands. This shows that the government is worried by the deterioration in its relationships with the Pacific.

AFTINET’s submission to the inquiry on trade relationships notes that Fiji and PNG have not signed the PACER-Plus trade agreement with Australia and New Zealand since it was completed in 2017. Only Australia, New Zealand and two Pacific Island countries have so far ratified it. The agreement requires eight countries to ratify, so it is not yet in force.

Fiji and PNG make up over 80% of the Pacific Islands economic output, so their absence means it is not an effective agreement. They have not signed PACER-Plus because they say the deal is lopsided and does not meet their development needs. Pacific Island countries already have tariff-free access to Australia. PACER-Plus mainly advantages Australia and New Zealand through reducing Pacific Island tariffs on imports and less controls on foreign investment.

During the nine years of negotiations, Pacific Island governments said consistently that their priority was addressing the climate change crisis, not a trade agreement. The Australian government has failed to address climate change issues in a way that is meaningful for the Pacific, which has damaged the relationship. This has created the context for China and others to compete for influence, which now appears to be the Australian government’s main concern.

In 2018 an unusually critical Parliamentary Committee Inquiry Report, with a majority of Australian government members, noted the absence of any independent study of PACER-Plus economic impacts.  The report acknowledged potential negative impacts on small and vulnerable Pacific Island economies.

Most Pacific Islands are still local farming and fishing economies, with dispersed populations and high transport costs, and are dependent on import tariffs which make up 10 to 20 per cent of government revenue. The World Bank has said these factors can prevent these economies from developing new industries and employment to offset the impacts of increased import competition. The Report warned that loss of government tariff revenue could also result in cuts to essential government services in areas like health and education.

The Report also noted that development assistance funds for implementation of the agreement were not additional funds but were coming from the existing aid budget. The report recommended that some of these funds be used to monitor the potentially negative impacts on revenue, public health, and gender equity.

But the government has not so far acknowledged these flaws in the deal. Trade Minister Birmingham has still been pressuring more Pacific Island governments to sign and ratify PACER-Plus.

The AFTINET submission to the current inquiry recommends that the Australian government cease trying to promote Pacer-Plus in its current form, which excludes countries with over 80% of Pacific Island economic output and is not an effective regional agreement. Instead the government should conduct a fundamental review of the terms of Pacer-Plus, based on listening to the real concerns of Pacific Island countries about the impacts of climate change as well as imbalances in the trade relationship.