Part of PACER or no
Friday, January 15, 2016
The Minister for Industry and Trade, Faiyaz Koya, stated Fiji would not commit to PACER Plus because of concerns with some aspects of the agreement (The Fiji Times, 15/12).
The minister pointed out the agreement does not provide for three commitments: long-term improved market access, preserving policy space, and binding commitments on labour mobility/development co-operation. The piece discusses these three issues within the context of regional negotiations.
The concerns by Fiji has some merit but it should not be a basis to derail the PACER Plus negotiation. Fiji should realise that PACER Plus will still go ahead and potentially we would be the losers in the long term.
Long-term improved market access
Market access is important for any country but it alone is not a panacea for resolving trade obstacles. Countries that have successfully addressed their supply side constraints such as sustainability of production, quality etc reap bigger benefits of market access. What we have to understand is that with the proliferation of regional trade agreements and the concessions in duties at the multilateral level, preference erosion in the long term is natural. However, the architecture of PACER Plus attempts to provide an avenue to counter non-tariff barriers, which are often seen as major obstacles to trade.
As trade barriers progressively come down, issues such as quarantine, biosecurity and standards will become a focus. An agreement such as PACER Plus could provide an amicable path to deal with these issues. In addition, with the development co-operation, regardless of its form, technical assistance to deal with conformity assessment, mutual recognition and equivalence for products of significant export interest into Australia and New Zealand markets will provide long-term improved market access.
These are important challenges and real impediments to trade in the Pacific including Fiji. As a result a holistic approach in determining long-term market access in PACER Plus has to be considered.
Preserving policy space
The right to regulate and policy space is not unique to PACER Plus. Fiji is a member of the WTO and has undertaken the GATS compatible commitments. The Trade in Services Agreement within the PACER Plus also emanates from the GATS agreement.
A positive list approach to scheduling trade in services is considered a better approach. A positive list simply means that a country has the sovereign right to commit that is, open up sectors that it wants to expose to foreign competition. All other sectors can be closed.
Secondly, one does not reduce its level of regulation but has to under a positive list on sectors of commitment, treat local and foreign investors alike. As such the Government has the right to regulate in principle. It is silent under a positive list and is implicit.
Binding commitments in labour mobility or development co-operation
On the issue of labour mobility, this is a double edged sword question, while one may infer that a legally binding labour mobility is good but from a development dimension, no RTA’s in the world (in different regions) has a binding labour mobility scheme. This is because flexibility has to be retained by both parties on its labour and immigration laws.
Secondly, from a practical point of view, Fiji will¸ in the future, have a “youth dividend” while countries such as Australia and New Zealand will have an ageing population. As such instead of encouraging labour mobility, which may be beneficial in the short term, in the long run, effective policies need to be developed to ensure that positive inflows of FDI creates in country jobs for all Fijians. As such, a non-binding agreement on labour mobility is beneficial for Fiji.
In so far as development co-operation is concerned, the crux of the issue is the type of technical assistance that Fiji will be able to secure for the development of the country. With or without a binding component, the issue is more the nature of assistance. For example conformity assessment, mutual recognition and equivalence are paramount, not just for the existing industries that are exporting but the new emerging industries.
Conformity with Australia and New Zealand standards are vital to penetrate the market. Assistance in the area of Customs, in relation to the product specific rules, training, capacity building and implementation for both the private and public sector are paramount.
Walking out of PACER Plus will be a long-term disaster for Fiji. Why? Fiji is one of the bigger players in the region and captures a major share of the Pacific market including exporting to countries in the North Pacific as well. As such there is a major competition between the private sector of Fiji and that of Australia and New Zealand.
Opting out would impact the private sector in Fiji. Simply if other countries provide better deals in terms of the overall agreement with Fiji deciding to withdraw, the private sector in Fiji will be marginalised and Australia and New Zealand will gain by capturing the market share of the Pacific. Unfortunately, this is the nature of regional agreements such as PACER Plus.
This is not the same as the Economic Partnership Agreement (EPA) with the EU. In the context of the EPA, the regional game was different given that EU is not a major exporter of products and services in the Pacific region. However, in the context of PACER Plus, caution has to be exercised as Australia and New Zealand are neighbours. Additionally, it must be understood that our long-term economic future will rest with Australia and New Zealand. With a combined GDP of more than $US1.6 trillion Australia and NZ would continue to be a major source of tourists, investment and remittances.
As a result, walking out now would be costly for Fiji. As such, engaging in PACER Plus and negotiating the best deal possible seems the best option for Fiji. While ensuring this, in the regional context and in the art of negotiations, compromise has to be provided to ensure successful conclusion with maximum benefits.
* Neelesh Gounder is with the School of Economics at USP. The views are his own and not of this newspaper. He can be contacted at email@example.com.