Chief Trade Adviser: “PACER Plus Offers a Unique Opportunity for Pacific Island Countries”

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Chief Trade Adviser for the Pacific Island Countries, Dr Edwini Kessie, spoke with Islands Business Magazine:

 

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Chief Trade Adviser, Pacific Islands, Dr Edwini Kessie defends push to finalise the text of PACER Plus, the Pacific Agreement on Closer Economic Relations between Pacific Islands Forum member countries and Australia and New Zealand.

Islands Business: You may have seen the press release by PANG and the statement by the Fiji Trade Minister asserting that the draft PACER Plus Agreement is unbalanced. As the Chief Trade Adviser of the Pacific Island Countries, do you share that view?

Dr Kessie: I have read the press release by PANG and the two documents referred to therein and I must say at the outset that I do not share the views expressed by PANG. The negotiations have not yet been concluded, so it is premature for them to assert that the draft Agreement is unbalanced and that the Pacific Island Countries will be assuming onerous obligations which would reduce their policy space and affect their development. On the contrary, I believe that PACER Plus offers a unique opportunity for the Pacific Island Countries to deepen their trade and economic links with Australia and New Zealand and enhance their participation in international trade to achieve robust economic growth and sustainable development. We have not yet commenced negotiations on market access in trade in goods, trade in services and investment, so it is premature to say that Australia and New Zealand will have unfettered market access to the islands. While it is true that some of the PICs will have to eliminate duties on products originating from Australia and New Zealand in accordance with WTO rules, they would not be required to eliminate duties on all products from these countries. The relevant WTO rules are very clear and it is the intention of the Parties to follow these rules. The PICs would still be able to maintain tariffs on some sensitive products to protect domestic industries and also government revenue. In the context of trade in services and investment, it is in the interest of PICs to give commitments in as many sectors as possible considering the importance of this sector to their economies and the need for them to attract foreign direct investment. Giving a commitment in a particular service sector, after carefully reflecting over a country’s development priorities, should not be seen as a loss for that country.

Islands Business: PANG alleges that the Pacific Island Countries would lose the right to regulate upon the entry into force of the Agreement. Is this statement accurate?

Dr Kessie: The right of countries to regulate is a core principle in the draft Trade in Services and Investment Chapters. This right is sacrosanct and will not be undermined by the PACER Plus Agreement. I think there is a misunderstanding of the phrase “provided that such regulation is not inconsistent with this Chapter”. Let me explain it with an example. Let us assume that a PIC gives market access to foreign banks to operate in its country without any limitations in its Schedule of commitments. It then subsequently passes a discriminatory regulation which affects only the foreign banks. In such a situation, it cannot lawfully maintain such a regulation. On the other hand, if the regulation is not discriminatory and does not distort conditions of competition, then the measure can be maintained. The Parties have agreed to use a positive list approach to schedule commitments, so it is up to each country to decide in which sectors or sub-sectors it wants to undertake commitments. Consistent with the approach adopted at the WTO, countries can also place limitations on market access or national treatment if they want to favour their domestic service providers. The view that PACER Plus would force the PICs to privatise public services is not true so also is the view that they would lose control over their land.

Islands Business: PACER Plus is not meant to lead to a conventional free trade agreement but a trade and development agreement that would facilitate the greater participation of the Pacific Island Countries in international trade. Are you on course in achieving this objective?

Dr Kessie: There is the recognition that a trade agreement in and of itself would not transform the economies of the Pacific Island Countries. The decision by Pacific Leaders to commence the PACER Plus negotiations was tacit acceptance of the failure of SPARTECA to enhance the participation of the PICs in international trade. The two defining elements in PACER Plus are labour mobility and development assistance. Consequently, the PICs are expecting Australia and New Zealand to undertake substantive commitments in these two areas. Labour mobility is seen as a low hanging fruit which would immediately confer benefits on the PICs after the entry into force of the PACER Plus Agreement. Studies conducted by reputable institutions, including the World Bank have all demonstrated the positive impact increased labour mobility could have on the economies of the PICs. With respect development assistance, it is clear that the economies of most PICs are very fragile and without targeted development assistance, they cannot take advantage of the enhanced market access that PACER Plus would provide. The PICs are expecting Australia and New Zealand to increase their spending on Aid for Trade so that they can address the supply-side constraints that have prevented them for increasing and diversifying their trade. We have thus far made modest progress in the negotiations in these two areas, but it is my fervent hope that we will eventually come up with agreements that will be satisfactory to all the Parties.

Islands Business: According to PANG, Australia and New Zealand will not be undertaking binding commitments in these two areas. If that is the case, don’t you see an imbalance in the commitments that would be undertaken by the Parties under the Agreement?

Dr Kessie: These two issues are very difficult and most developed countries would refuse to undertake binding commitments on them in a preferential trade agreement. Even at the WTO, most of the special and differential treatment provisions are couched in hortatory language. The provisions of Part IV of the GATT, which is entitled Trade and Development, are a case in point. At the end of the day, I think it boils down to trust. As PANG itself conceded Australia and New Zealand are the largest donors of aid to the region. It is my expectation that this would continue to be case in the foreseeable future, even though both the Australian and New Zealand Governments are intent on making cost savings in a bid to balance their budgets and achieve a surplus. With the overwhelming support that the seasonal worker programmes are currently enjoying among the stakeholders in Australia and New Zealand, it is highly unlikely for them to be abolished. We are still negotiating on these issues and I cannot tell you what we will end up with.

Islands Business: The tenth session of the PACER Plus intersessional meeting will be taking place in Port Vila, Vanuatu in early May 2015. What do you hope to achieve at this meeting?

Dr Kessie: It is the expectation of the Parties to close as much as possible the gaps in the draft Chapters on Investment, Trade in Goods, Rules of Origin, Labour Mobility and Development Assistance. We are aiming at finalising negotiations on the legal texts by July 2015, so that we can begin working in earnest on the Schedules of Concessions and Commitments of the Parties with a view to finalising them by July 2016.