NSAs WORKSHOP ON THE PACER PLUS NEGOTIATION

The purpose of this report is to provide a summary of the main discussion themes at the workshop on the PACER Plus negotiations for Non-State Actors (NSAs), which was organised by the OCTA in collaboration with the Pacific Island Forum Secretariat and with the financial support of the European Union in Nadi, Fiji on 12-13 May 2014.

PDF summary can be downloaded here.

General Summary

2. The OCTA organised a workshop on the PACER Plus negotiations for NSAs in Nadi, Fiji on 12-13 May 2014, with the financial support of the European Union within the framework of the Pacific Integration Technical Assistance Project (PITAP), which is coordinated by the Pacific Island Forum Secretariat. The workshop aimed at briefing the NSAs on the current status of the negotiations and promoting regional dialogue among relevant stakeholders on trade and investment issues. The workshop was attended by over fifty business leaders from Forum Island Countries (FICs) and Australia, leading personalities from the NGO community in the Pacific as well as senior representatives of regional organisations, including the Pacific Islands Forum Secretariat and Pacific Trade and Invest. (Refer to Annex 1: List of participants).

3. The meeting was opened with a prayer by Ms. Margaret Sete of the PNG Council of Churches and followed by introductory remarks by Dr. Edwini Kessie, Chief Trade Adviser (CTA) of the OCTA. Statements were delivered by Mr. Shiu Raj, Director of the Economic Governance Programme (DEG), PIFS, Ms. Margaret Malua, representing the Pacific Islands Private Sector Organisation (PIPSO) and Mr. Joji Fatiaki, representing the Pacific Islands Association for Non-Government Organisation (PIANGO) Secretariat, respectively. The keynote address was delivered by Mr. Johnny Engell-Hansen, Deputy Head of the European Union Delegation for the Pacific.

4. In his introductory remarks, the Chief Trade Adviser of the Forum Island Countries, Dr. Edwini Kessie, said that progress was being made in the PACER Plus negotiations and that it was important for the Parties to come up with an agreement that would be meaningful to the private sector and provide them with opportunities to invest and engage in cross-border trade effortlessly within the region. He noted that through increased trade and investment, the FICs would be able to achieve robust economic growth creating opportunities for all segments of society, particularly for the under-privileged and minorities.

5. In his keynote address, the Deputy Head of the European Delegation for the Pacific, Mr. Johnny Engell-Hansen, noted that the FICs faced a myriad of challenges in the global economy, including small populations and markets, lack of economies of scale and infrastructural problems which increased the cost of doing business in the Pacific and affected the competitiveness of their exports. He underlined the commitment of the European Union to support regional integration in the Pacific as a way of addressing some of these challenges and enabling the FICs to alleviate poverty and attain sustainable growth and development.

6. The programme covered the following: an overview of the participation of the FICs in regional and international trade, transparency in the PACER Plus negotiations, attracting foreign direct investments in the FICs, building capacity of the NSAs and the status of the PACER Plus negotiations on each negotiating issues, namely, labour mobility (beyond Mode 4), development assistance, rules of origin and customs procedures, sanitary and phytosanitary measures and technical barriers to trade, trade in goods, trade in services and investment. (Refer to Annex 2: Annotated Agenda).

7. The workshop was successful in improving the understanding of the participants of the PACER Plus negotiating issues. The Participants raised a number of procedural and substantive issues which were addressed by the resource persons.

Summary of Discussions

Session one: Participation of FICs in regional and international trade

8. A representative of the OCTA, Mr. Alipate Tavo, made a presentation on the participation of FICs in regional and international trade. The challenges facing FICs in participating actively in regional and international trade were highlighted. These included their small populations, lack of economies of scale, geographical remoteness, high transportation costs, low domestic rate of savings and limited foreign direct investment (FDI). There was an examination of the key sectors of FIC economies and how they have evolved in light of recent trends in the global economy. A comparison was made with other island states in Africa and the Caribbean to determine the evolution of economic growth in these countries. The role of regionalism as an instrument to facilitate the sustainable growth and economic development of the FICs was also examined. In that context, the various regional integration initiatives in the Pacific region, including PACER Plus and the Economic Partnership Agreement (EPA) negotiations were discussed. .

9. It was noted that the various regional initiatives had been adopted by FIC Leaders as a response to the various challenges faced by FICs and that several of these initiatives had evolved overtime. These included the Melanesian Spearhead Group (MSG) trade agreement, the Pacific Island Countries Trade Agreement (PICTA) and PICTA Trade in Services Protocol and the non- reciprocal South Pacific Regional Trade and Cooperation Agreement (SPARTECA) between the FICs and Australia and New Zealand. The latter was supposed to lay the foundations for broad regional integration among Pacific countries but it has failed to deliver on its objectives.

10. The launch of PACER in 2001 was seen as a response to the shortcomings of SPARTECA. It established a framework for the gradual trade and economic integration among the Forum countries leading to the establishment of a WTO consistent single market covering trade in goods, services, capital and labour. The PACER Agreement did not include liberalization commitments by the Parties. Negotiations for a comprehensive trade agreement were launched in 2009 under the title PACER Plus. The Leaders did not, however, provide a roadmap to guide the negotiators in their work. As a result of this conspicuous gap, negotiations initially proceeded on the basis of informal understandings and Ministerial decisions focusing on the priority issues as agreed by the parties. The initial focus was on rules of origin, sanitary and phytosanitary measures, technical barriers to trade, customs procedures, development assistance and regional labour mobility (beyond mode 4).

11. To progress the negotiations, the Parties decided at the PACER Plus Officials Meeting in Brisbane in March 2012 to work intersessionally. Subsequent to this decision, FIC Trade Ministers established four negotiating groups (SPS and TBT; Customs Procedures and Rules of Origin; Labour Mobility and Development Assistance) and gave them the mandate to negotiate on behalf of the FICs, although decisions reached in intersessional meetings had to be agreed ad referenda by PACER Plus Officials. At their meeting in the Republic of Marshall Islands in May 2012, Ministers requested officials to redouble their efforts and progress the negotiations. In response to that call and the progress made in the intersessional meetings, a roadmap proposed by Australia and New Zealand was adopted by the Parties at the Forum Trade Officials at their meeting in Samoa in July 2013. The roadmap, which called for the extension of the negotiations to trade in goods, trade in services and investment, was endorsed by officials. Following that, the FIC Trade Ministers established two additional negotiating groups, namely the negotiating group on Trade in Goods and the negotiating group on Trade in Services and Investment. To date, six intersessional meetings had taken place and three additional meetings are foreseen in 2014 with a view to concluding the negotiations on the legal texts by December 2014 or in early 2015.

12. On the role of OCTA, it was noted that it was set up primarily to provide independent advice to the FICs and to support them in the PACER Plus negotiations. Such support included undertaking research and preparing background documents on trade issues of relevance to the PACER Plus negotiations; negotiate on behalf of the FICs upon request; service the OCTA Governing Board and other regional meetings; and assist member states with national consultations on PACER Plus. The core funding of the OCTA was provided by Australia and New Zealand, with in-kind support provided by a number of organisations including the World Bank and the WTO. The OCTA recently received funding support from the European Union under the framework of PITAP.

13. During the discussions, the CEO of PIPSO requested if the OCTA could undertake a study focusing on the constraints faced by the private sector in the Pacific. She suggested that it would be useful to consider a number of elements, including economic indicators, trade openness in the FICs and examining data on pre-SPARTECA trade volumes and post-SPARTECA trade volumes. In response, the OCTA highlighted the difficulties in retrieving reliable trade data in the FICs and said that from the available data, it would appear that Fiji was the main beneficiary from SPARTECA given the preferential access of its textiles and clothing products to Australia and New Zealand. The OCTA will consider collating the available data to depict the actual impact of SPARTECA and how PACER Plus could enhance trading opportunities.

14. It was also suggested that the OCTA conduct a study comparing economic trends in the island states in the Caribbean and Africa highlighting the success stories which could be built upon by Pacific countries. The NSA delegation from the Cook Islands emphasized the importance of infrastructure and transportation as enabling factors for the private sector and voiced their disappointment that there was no private sector representation on the Negotiating Group on Trade in Services and Investment considering their knowledge and expertise in these two areas and the importance to these sectors to their economies. It was noted that aquaculture offered new opportunities to the FICs and it was an area which deserved closer attention together with agriculture, fisheries and tourism. Tonga’s NSA representative noted that most of their trade takes place in the informal sector with most of their products (mostly agricultural) exported to other Pacific islanders in Australia, New Zealand and the United States. There was no linkage to trade agreements to enable trade to occur in the formal sector and requested if there were capacity building programs to bring the informal activities into the formal sector. It was mentioned that the Pacific Trade and Invest and other programs like the Pacific Horticultural and Agricultural Market Access (PHAMA) had facilitated access by FIC products to the formal markets of Australia and New Zealand and work in this area was on-going. Nauru’s NSA representative highlighted its unique circumstances relating to labour mobility from Australia with regards to the refugee camp/detention center. Samoa’s NSA representative requested the OCTA to undertake a study on how the FICs could increase their 0.05% share in world trade.

Session Two: Transparency in PACER Plus Negotiations

15. The CEO of PIPSO, Ms. Mereia Volavola, delivered a presentation on the role of the private sector in PACER Plus national consultations and in the negotiations. She said that there should be greater involvement of the private sector, NGOs and trade officials in trade negotiations. It would have been desirable if trade officials had been invited to participate in the meeting, so that they could have heard directly their views on procedural and substantive issues. Instead of a summary record of the proceedings, it would be preferable to have an Outcomes Document so that it could be fed into the negotiating machinery. It would be useful if OCTA organised the national consultations on PACER Plus in close coordination with PIPSO and PIANGO so that they could liaise with their national members and get them to participate in the consultations. This would ensure inclusiveness and an improved turnout at the consultations. She requested the OCTA to provide regular updates on the PACER Plus negotiations and demanded that representatives of the private sector be allowed to participate in intersessional meetings. PIPSO had conducted an on-line survey on PACER Plus in April 2014 and the key findings showed that the majority of private sector representatives had “never” been briefed on PACER Plus by trade officials and the use of the PSR methodology was the issue that was least understood by the private sector. There was a lack of appreciation of the possible benefits of PACER Plus at the grassroots level and more had to be done to involve all stakeholders in the national consultations.

16. In the discussions, NSA representatives from Tuvalu and Nauru highlighted that their Trade Departments were staffed by a few officials and the turnover of staff was high. They urged PIPSO to push for the private sector organisations (PSOs) to attend capacity building workshops on trade issues that were only available to government officials. Samoa’s NSA representative emphasised the need to look at the practical side of trade and the tangible benefits that could be derived from trade agreements. Tonga’s NSA representative alluded to the high cost of certification of products in key markets such as Australia and said that a group organic certification for products such as vanilla and virgin coconut oil by Australian Agencies could cost as much as $30,000. It was mentioned that there was a Pacific Organic Standard Centre, but it lacked the necessary human and other resources to operate optimally. It was inquired whether it would be possible to fund the Centre within the framework of the Development Assistance Chapter so as to enable it to make organic certification more affordable in the Pacific.

17. A number of participants spoke in favour of actively involving the private sector in the PACER Plus negotiations. The OCTA suggested that a realistic approach would be for the private sector to actively engage with their governments at the national level and fully participate in the national consultations on PACER Plus. NSA reprsentatives from Samoa and Tonga proposed that it should be a policy rule for the PSOs and NGOs to attend the negotiations themselves rather than relying on governments to make decisions on their behalf. It was emphasised by a prominent Fiji private sector representative that such issues had been discussed in the past and the NSAs should not re-invent the wheel. It was mentioned that the initiative for deeper engagement with PSOs had to come from governments. In that regard, reference was made to the PIPSO charter, which envisaged closer collaboration with governments. It was noted that at the national level, there were bodies such as National Trade Development Committees through which PSOs could make their views on the negotiations known.

18. On behalf of PIANGO, Mr. Joji Fatiaki, made a presentation on the role of the NGOs/Civil Society in PACER Plus national consultations and in the negotiations. He stated that PIANGO was supportive of trade and shared the views of the PIPSO on the need for the PSOs and NGOs to be fully involved in trade negotiations. He wondered what the “Plus” in the PACER Plus negotiations stood for and underscored the need for the social dimension of trade to be taken into account in the negotiations. 19. The NSA delegation from Cook Islands sought confirmation of whether the PACER Plus negotiations covered trade in services, which was an area of great importance to their country. The need for imported products to meet certain standards in terms of quality was alluded to. It was mentioned that trade led to competition and affordable prices for consumers and as such PACER Plus could bring about many benefits for the Parties. The Cook Islands had identified niche markets in agriculture, fisheries and aquaculture products and it was necessary to preserve their cultural authenticity. The need for government policies to support the production and marketing of products such as black pearl, noni juice and virgin coconut oil was highlighted. Regarding labour mobility, it was noted that skills drainage was a significant problem for the Cook Islands, as most of their skilled workers had departed to work in Australia and New Zealand. However, there was increasingly more skilled workers from FICs, including Tuvalu, Fiji, and Solomon Islands taking up jobs in different sectors of the Cook Islands’ economy. A number of participants supported the views expressed by Cook Islands’ NSA representatives and said that labour mobility, trade in services, investment and the production of niche products constituted the “Plus” in PACER Plus.

20. Samoa’s NSA representative underscored the need for a productive relationship between governments and NGOs. Solomon Islands’ NSA representative stated that NGOs were represented on the National Trade Council. A challenge for the NGOs was the lack of capacity to participate actively in the meetings and make substantive interventions. Tonga’s NSA representative stated that getting women and the youths involved in development projects such as the project in Samoa enabling the export of bananas to New Zealand, and also the projects in PNG and Vanuatu enabling the export of coffee and spices to Japan, respectively constituted the “Plus” elements in PACER Plus.

Session Three: Foreign Direct Investments in Forum Island Countries

21. The president of the Australia-PNG Business Council, Mr. Peter Taylor, delivered a statement on the key policy settings for attracting foreign direct investments (FDI). He noted that PACER Plus offered an opportunity for liberalisation and the enactment of rules that would encourage greater trade and investment in the region, leading to greater national prosperity and economic growth. To be able to reap the benefits that PACER Plus could deliver, participants needed to think seriously about the quality of their investment environment and how they could attract investment to contribute to their ongoing efforts to attain economic growth and sustainable development.
22. The Trade Commissioner of the Pacific Trade and Invest (PT&I) in Sydney, Mr. Caleb Jarvis, made a presentation on attracting foreign direct investment to the FICs. He emphasised that FDI was needed to create growth and that FDI levels in the Pacific were very low. He mentioned that it was difficult to do business in the Pacific and returns were sometimes not very significant. He noted the linkage between investment and the development of the tourist industry in the Pacific and said that the PT&I believed that there were outstanding prospects in the Pacific and these should be capitalized on. He highlighted a number of success stories in the FICs which could be built upon. The PT&I facilitated successful partnerships between the private sector and government agencies, and between exporters and overseas buyers. Their partnership philosophy was based on effective communication, capacity building and a commitment to developing and strengthening relationships for sustainable economic growth in the Pacific region.

23. During the discussions, the actual benefits of investments in the FICs were questioned. A Samoan NSA representative said that Samoa had undergone major reforms to attract FDI, but these had not resulted in an increase of investment inflows to the country. The Government was now considering a scheme under which if foreign investors invested a certain amount, they would be given Samoan citizenship. The Cook Islands’ NSA representative stressed the need to customise their investment climate to their unique circumstances. Currently, physical infrastructure was a challenge and it was necessary to look at community sector partnerships – involving churches, women’s groups and other key stakeholders.

24. It was noted that, from an investor perspective, the benefits from a trade agreement , were not immediate and could be realized sometime after the implementation of the agreement. A case in point was SPARTECA. It took some time before Fiji’s garment industry started reaping benefits from the agreement. Investors took time to assess the environment and the same would happen after the entry into force of PACER Plus.
25. The poor state of infrastructure in the FICs was raised. It was noted that FIC governments had to borrow from the World Bank, the Asian Development Bank and their Provident Funds to fund major infrastructural projects. It was further noted that in the area of business licensing and registration, the FICs needed to streamline their regulations, as it took months in some of them to complete the registration process. This was burdensome and unattractive to potential investors.

26. It was also noted that a noticeable trend in several FICs was that existing companies were being taken over by foreign investors instead of them establishing new ones. A case was made for the removal of non-tariff barriers in PACER Plus so as to allow farmers the opportunity to increase production and to engage in cross-border trade.

Session 4: Building Capacity of the Non-State Actors

27. Ms. Belinda Filo-Tafunai, Principal Foreign Services Officer, Ministry of Foreign Affairs and Trade of Samoa made a presentation on Samoa’s experience in interacting with NSAs and building their capacity to comprehend the trade issues being negotiated at the regional level, including PACER Plus. She described the national mechanisms that had been set up in Samoa to address trade issues starting with the National WTO Working Committee which facilitated Samoa’s accession to the WTO and the National Working Committee on Trade Arrangements (NWCTA), which had a broader mandate extending to all trade arrangements to which Samoa was a party (WTO, PICTA, EPA, PICTA TIS, PACER Plus, Generalised System of Preferences (GSPs) and the Enhanced Integrated Framework (EIF). The NWCTA provided guidance to the Cabinet so that well-informed decisions could be made to ensure that Samoa derived significant gains from trade arrangements which were aligned to the country’s national work plans and priorities. The NWCTA coordination work has included analysis of trade in goods and services negotiating issues in connection with Samoa’s WTO accession; signing off market access offers on EPA; and discussing sub-sectors under PICTA TIS Protocol.

28. In terms of the process followed by Samoa in undertaking national consultations on PACER Plus, Ms. Filo-Tafunai said that the Ministry of Foreign Affairs and Trade (MFAT) had grouped stakeholders taking into account the priority issues (RoO, CPs, LM, DA, TBT, SPS, TIG, TIS and Investment) and had given general presentations on these issues and how they had been handled in FTAs concluded by Australia and New Zealand. These had been followed by specific and detailed presentations on the priority areas. The NWCTA had been provided with pre and post-PACER Plus negotiation updates and briefs by Samoan negotiators. Samoa intended to organise further national consultations on PACER Plus with the assistance of the OCTA.

29. In terms of engagement with the private sector and civil society, the Government had had discussions with exporters on RoO methodologies using OCTA consultation tools as a basis and organised a national workshop for businesses on the PSR methodology, which was facilitated by the OCTA and OCO. To ensure inclusiveness, the Government encouraged participation in workshops on trade issues and also in the actual negotiations. Samoa has also been conducting consultations with the view to commissioning studies on implications of PACER Plus. In terms of the way forward, Samoa was capitalizing on the lessons learnt from the thirteen years it spent on negotiating its accession to the WTO. It would continue the dialogue at the national level with relevant stakeholders using the NWCTA as the principal forum for discussions and formulating national positions on the negotiating issues. It would continue with its engagement with the private sector and civil society.
30. In the discussions, NSA representatives commended Samoa for having been able to establish a coherent and functional trade policy framework and recommended that other FICs follow such best practices starting with the formulation or reactivation of national trade committees. The question was asked whether trade officials shared their experiences regarding their national consultation processes in other meetings and if updates on the PACR Plus negotiations were regularly provided. The DEG-PIFS, Mr. Shiu Raj, explained that the objective of national consultations was to share information between government, private sectors, and NGOs. He noted that consultations was also held in the margins of PACER Plus meetings in consultation with PIANGO and PIPSO. It was noted that most FICs had dedicated Committees in place to examine trade policy issues but some were not active. There was the need for all sectors to be more proactive and not just rely on the government to call meetings. Vanuatu said that they have a National Trade and Development Committee which was inclusive. NSAs represented in its meetings included churches, business people, chamber of commerce, heads of provinces, council of chiefs and other prominent stakeholders. Development partners also participated in the meetings as observers so did the MSG Secretariat and OCTA.

31. PIPSO noted that while national structures could have competent people, the issue was the dissemination of information to all the stakeholders. It was observed that NSAs involved in national committees should do their utmost to disseminate information to their members. PNG commended Samoa for its elaborate set up and said that PNG was yet to have such a framework for consultation with relevant stakeholders.

32. The need for consistency in participation was underscored. It was reiterated that the capacity of trade officials in the Pacific was very limited and the turnover of staff was very high. The private sector was encouraged to have dedicated people who are interested and passionate about trade to be involved in the work of the committees. PIPSO argued that governments needed to allocate more resources to trade if it was an important issue. Vanuatu agreed on the need to disseminate information at the grassroots level and said that they have been using the churches, women and youth councils.

33. Samoa suggested that the OCTA should make available information manuals providing updates on the PACER Plus negotiations in simple language to the people of the FICs.
Session Five: Status of the Negotiations on Labour Mobility

34. The objective of session five was to focus on issues of interest to the FICs in the labour mobility negotiations and provide an overview of the status of the negotiations. The CTA indicated that the main objective of the negotiations on labour mobility was to reach a balanced outcome that would enhance the benefits for both sending and receiving countries from existing labour market arrangements.

35. Turning to the negotiating issues, the CTA said that the fundamental issue in the negotiations was whether commitments on labour mobility should be included in the PACER Plus Agreement. There were divergences in the Parties’ positions as to whether including them in the PACER Plus Agreement would trigger the MFN obligations of some parties under the WTO General Agreement on Trade in Services and also under their preferential trade agreements. The Parties were also engaged in discussions on the removal of the cap or the significant increase of the current quotas under the existing seasonal programs. Under the RSE, the number of workers was limited to 8000 per year, while under the SWP, it was roughly 3000 per year over a 4-year period. There were also discussions on broadening the scope of the schemes to include new employment areas of interest to the FICs, including construction and health care. The FICs have also demanded that the adoption of practical measures to improve the functioning of the schemes, including streamlining the processes under the SWP and the RSE, implementing incentives for employers to recruit Pacific workers, technical and financial assistance to strengthen the capacity of Pacific countries in labour migration matters and assistance with re- integration after the workers return home. 36. During the discussions, a number of participants asked whether a compromise could be reached on the issue of the legal status of commitments on labour mobility under PACER Plus. The possibility of concluding a side agreement on labour mobility was discussed, but doubts were expressed as to whether it would satisfy the FIC demand for legal certainty. Comments were made stressing that Australia and New Zealand had to address labour mobility from a development angle and give the FICs a firm commitment on the issue. It was argued that due to the economic differences between the parties and the fact that FICs stood to gain very little, if at all, from their liberalization commitments in trade in goods, services and investment, PACER Plus had to contain substantive commitments on labour mobility and development assistance.

37. With regard to the extension of the schemes to sectors other than horticulture and viticulture, the CTA said that the extension of the scheme to accommodation, aquaculture, cotton and cane on a trial basis was a step in the right direction. He acknowledged that the RSE with a quota of 8000 workers per year offered more opportunities to FIC workers than the SWP. He further noted that given the employer-driven nature of the SWP and RSE, an increase in the quota under both schemes would not necessarily result in an increase in the recruitment of Pacific workers and that it was also important to focus on the quality of the schemes by looking at policy coherence and the sort of incentives that could be provided by Australia and New Zealand to encourage their employers to recruit Pacific workers. These included, among others, a Pacific preference, tax incentives, subsidisation of airfares and streamlining the processes under the RSE and SWP. In this regard, some participants noted that tax incentives could act as an effective stimulus to employers and they referred to a similar scheme applied in New Zealand to encourage companies to recruit students fresh out of university. Others expressed doubts about the feasibility of these incentives.

38. Turning to how to facilitate the cross-border movement of semi- skilled workers, the CTA indicated that it was necessary to put in place a framework for the mutual recognition of qualifications. He further noted that the expansion of the Australian Technical Pacific College (ATPC) programme could facilitate the employment of Pacific citizens in Australia and New Zealand. In this regard, one participant remarked that facilitating the recognition by Australia of degrees from the University of South Pacific (USP) would also be helpful. The CTA noted that the issue of mutual recognition of qualifications was being discussed in the trade in services negotiations.

39. It was noted by Cook Islands’ NSA representative that their country was facing severe labour shortages and that the discussions on labour mobility should not be confined to FIC workers accessing the Australian and New Zealand labour markets, but also the markets of other FICs as well. The need for reintegration programmes to facilitate the absorption of returnees to the labour market of their respective countries and assisting them to utilize the skills acquired in Australia and New Zealand to set up businesses and engage in productive activity was underscored by Solomon Islands’ NSA participants.

40. Tuvalu’s NSA representative noted that they had a number of experienced sailors who were currently unemployed. PACER Plus would generate development benefits if they could seek jobs in Australia and New Zealand. Kiribati’s NSA representative associated itself with the statement by Tuvalu and stated that they had a number of competent women who could work on cruise ships and as such, consideration should be given to extending the discussions to the maritime sector. The CTA said that these issues would be raised and discussed in the negotiations. He further stated that it was his understanding that under the RSE, workers from Tuvalu and Kiribati were given longer contracts in view of the expensive airfares. It was noted that it was customary for trade agreements to have provisions facilitating the movement of skilled and not unskilled people. This was the case under the MSG Skills Movement Scheme.

41. The CTA said that considering the importance of labour mobility for the FICs and the wide gaps in the positions of the Parties on the key issues, New Zealand had tabled a compromise proposal for the consideration of the Parties at the sixth intersessional meeting. While the proposal was welcomed by the FICs, they said that it did not address their main concerns, namely the legal status of commitments on labour mobility, the removal of the caps or a significant increase in the number of workers allowed each year under the RSE and SWP and the extension of the schemes to other sectors of interest to the FICs, including health care and construction. . 42. The DEG-PIFS explained that under PICTA, Ministers were supporting labour mobility amongst FICs, particularly in trade in services sectors. There was already a framework in place to encourage mobility of workers amongst the FICs to respond to their specific needs such as the implementation of the LNG project in PNG.
Session Six: Status of the PACER Plus Negotiations on Development Assistance

43. The CTA noted that negotiations on development assistance were driven by a general acceptance that PACER Plus was not expected to be a conventional free trade agreement, but rather a trade and development assistance agreement that would facilitate the economic growth and sustainable development of the FICs. This was due to the recognition of the capacity constraints of the FICs and the need for a comprehensive development assistance component to assist the FICs to benefit from an eventual agreement.

44. In terms of negotiating issues, the CTA said that the parties had been engaged in discussions on whether each Chapter of the Agreement should spell out the development assistance needs of the FICs or whether the development assistance needs of the FICs should be bundled together in a Work Program, which was the preference of Australia and New Zealand and was the approach followed in the free trade agreement between Australia and New Zealand and ASEAN countries (AANZFTA). There was broad convergence to follow the AANZFTA approach but on condition that the unique circumstances of the FICs would be taken into account in developing the Work Program which would be annexed to the PACER Plus Agreement. One area of potential disagreement between the Parties was the legal status of the Work Program. While some FICs wanted it to be legally binding, there was the view that the document should be flexible so that it could be amended to take account of the evolving needs of the FICs.

45. There were some divergences in the Parties’ positions on the scope of the Chapter. The FICs expect Australia and New Zealand to provide them with assistance not only to implement their obligations under the PACER Plus Agreement, but also to assist them to address the supply side constraints that have prevented them from developing and expanding their trade. There appears to be a growing convergence that the FICs would be provided with both “implementation” and “development assistance”. The CTA pointed out that the FICs have demanded any funds provided should be new and additional. One issue which needed to be further discussed among the Parties was the mechanism for the delivery of aid. Whereas some FICs preferred assistance to be provided directly to them under existing bilateral aid programmes between them and Australia and New Zealand, others suppored the channeling of funds to a central regional fund such as the Pacific Regional Trade Development Facility. The Parties were also engaged in discussions on related issues such as the size of the funds that would be provided and how they could be accessed.

46. During the discussions, NSA representatives were unanimous in stressing that the funding provided by Australia and New Zealand had to be new and additional to the aid currently being provided. The view was expressed that access to the development assistance under PACER Plus had to precede the conclusion of the negotiations so as to strengthen the capacity of FIC exporters to take immediate advantage of the agreement upon its implementation. The point was made that assistance could, for example, be provided to enable FIC exporters to meet the applicable TBT and SPS measures in Australia and New Zealand.

47. The question was again raised as to what the “Plus” in PACER Plus meant. The CTA said that he could not give a precise answer but that it probably referred to the non- conventional elements of the PACER Plus, including labour mobility and development assistance. The CTA said that the OCTA would be collaborating with the PIFS in compiling the needs of FICs, particularly under the Investment and Trade in Services Chapters. He noted that the PIFS had already coordinated a major study on the needs of the FICs in the area of Trade in Goods which the OCTA could rely on in the context of PACER Plus. The CTA noted that it was the intention to build on successful programmes such as the PHAMA programme and not replace them. In response to a question as to whether the development assistance chapter was linked to the WTO Aid for Trade (AfT) initiative, the CTA said that there were indirect linkages, as the demands of the FICs in PACER Plus revolved around the four main components of the AfT, namely trade policy and regulations, productive capacity building, trade-related infrastructure and adjustment assistance.

48. It was noted that for most developing countries, including FICs, trade had not been mainstreamed into the national development programmes and that priority was usually given to health and education. Trade was often relegated and assistance was usually provided on a government to government basis. However, for PACER Plus to achieve its objectives, it was necessary for ways to be explored to provide assistance to the private sector so that they could take advantage of PACER Plus to engage in cross-border trade. It was argued that for the Work Program to have any relevance, it was important to involve the private sector in its development. The OCTA stated while it would be desirable to do so, there were reports that NSAs did not usually participate actively in national consultations or relevant trade meetings. Solomon Islands said that it was necessary for the FICs to be weaned off aid. It was important for the private sector to be provided assistance so that they could lead the economic recovery effort in the FICs. There was the suggestion that invitations to participate in consultations and other trade-related meetings should be sent directly to PSOs and NGOs, as the invitations were not always delivered to them.

49. The DEG explained that the PIFS was currently working on the AfT “Strategy” from a comprehensive and holistic approach covering all FTAs including PICTA, EPA and PACER Plus. The document, which has been in existence since 2009, was updated regularly. It was intended to seek Ministerial endorsement at the forthcoming meeting in Kiribati at the end of May 2014. The strategy covered regional and sub-regional level initiatives, including arrangements between two FICs that had similar needs. The current framework allowed for that and the purpose of the Pacific Regional Trade and Development Facility (PRTDF) was to provide assistance directly to the private sector and relevant key stakeholders rather than through the normal bilateral channels where priority was usually given to Education and Health.
Session Seven: Status of the PACER Plus Negotiations on Sanitary and Phytosanitary Measures (SPS) & Technical Barriers to Trade (TBT)

50. The CTA indicated that the decision to include standards in the list of PACER Plus’s priority issues stemmed from the recognition of the inability of the FICs to satisfy the stringent SPS and TBT requirements of their trading partners. The objective of the chapters on SPS and TBT were to set out the framework for the application of such measures in accordance with international disciplines, but also to ensure that Australia and New Zealand provided assistance to FICs to comply with their relevant SPS and TBT requirements which posed a significant challenge for small exporters from the Pacific. The compliance costs were often too high and ways had to be found to ensure that they did not stifle export growth and diversification.

51. A threshold issue in the negotiations was whether non-WTO FIC parties should apply the WTO disciplines as reflected in the SPS and TBT Agreements. The CTA noted that it has been provisionally agreed that they would not have to apply the disciplines until such time that they acquired the capacity to do so. A critical element of the negotiations is the assistance to be provided to assist the FICs to implement their obligations under the Chapters and also to comply with the applicable standards in key markets. The negotiations were advanced and there were a few issues left to be resolved by the Parties. 52. During the discussions, the representative of Flour Mills of Fiji (FMF) noted that there were not adequate testing facilities in the Pacific which meant that sub-standard goods could easily enter into the commerce of a country. He wondered whether there would be any disciplines in the TBT and SPS Chapters to strengthen the capacity of FICs to test the safety of imported products. The CTA responded that the issue had been raised in the negotiations and he hoped that Australia and New Zealand would respond positively to the requests by FICs for assistance in this area. The CTA noted, however, that it would be economically efficient if assistance was provided on a regional or sub-regional basis rather than assisting each country to establish its own laboratory.

53. Samoa’s NSA represenative noted that the requirement of heat treatment facilities and spraying and cleaning facilities posed a considerable challenge for most FICs. While there was a facility for food testing mainly for fruit flies at the University of South Pacific in Fiji, there was the requirement that goods sent for testing must comply with Fiji’s biosecurity laws.
Session Eight: Status of the PACER Plus Negotiations on Rules of Origin and Customs Procedures

54. The inability of FICs to comply with stringent rules of origin under SPARTECA has been identified as one of the main reasons the agreement could not fulfil its basic objective of helping the FICs to increase and diversify their trade. It is the objective of the PACER Plus Parties to come up with rules of origin which would be sufficiently flexible and reflect the level of processing feasible in the FICs. The CTA indicated that the main issue of contention among the Parties in the negotiations had been the methodology to be used to determine the origin of non-wholly obtained or produced goods. Initially, the FICs had expressed a preference for generally applicable rules but had now accepted to use Product Specific Rules. With this development, there were a few issues left to be resolved in the text, including whether or not parties should use a declaration of origin or certificate of origin to support a claim for preferential treatment.

55. During the discussions, the participants stressed that it was important for the rules of origin to be flexible, otherwise they would undermine the market access commitments of Australia and New Zealand. The CTA noted that the Parties were currently drafting the PSR Schedule and once it was completed, the OCTA would consult with all relevant stakeholders to determine whether the rules were appropriate for them. The CTA assured that the OCTA would protect confidential business information which might be disclosed in the course of the development of the schedule. It was asked whether there would be a dedicated rule for each tariff line. The CTA responded that it was possible to have a single rule for an entire Chapter of the HS Code. One approach that was being considered was the development of rules only for the current exports of FICs.

56. The DEG-PIFS emphasised the linkages between PACER Plus and the EPA and suggested that it would be useful for the private sector to also look at the rules for products going to the European market as they develop the PSR Schedule under PACER Plus to assess the impact of the rules in each FTA.

57. With respect to customs procedures, the CTA noted that the negotiations were concluded at the fourth intersessional meeting in August 2013. The rapid progress could be attributed to the recognition by all Parties that it was in their interest to adopt trade facilitation measures to simplify trade rules, reduce red tape and costs and boost the conduct of cross-border trade. As in the case of SPS and TBT, WTO disciplines would not apply to non-WTO FIC Parties until such time that they acquired the capacity with the assistance of Australia and New Zealand and other donors. Broadly, the capacity needs could be classified into two categories. Under the first category, FICs would need “implementation” assistance to implement several provisions of the Chapter, particularly those related automated systems, customs valuation, risk management, advance rulings, while under the second category, they would need broader trade-related assistance to upgrade, for example, their ports and airport facilities to handle increased volumes and facilitate the clearance of goods.

58. During the discussions, the issue of fees was raised. The CTA explained that under the Agreement, countries could maintain customs duties, but fees charged in connection with exportation and importation would have to be commensurate with the services rendered.

Session Nine: Status of the PACER Plus Negotiations on Trade in Goods

59. The objective of the negotiations on trade in goods was to create a secure and predictable framework within which cross-border trade could take place among the PACER Plus Parties. The CTA said that the Parties had recently begun negotiations and that they were not as advanced as in the other areas. He noted that the FICs had a defensive interest in the negotiations, as there were concerns about the possible loss of tariff revenue as a result of the elimination or significant reduction of tariffs on products originating from Australia and New Zealand in order to comply with relevant WTO rules on the formation of FTAs.

60. In the discussions, concerns were raised about the ability of the FICs to protect their sensitive sectors and also tariff revenue. The CTA said that the Parties were not very advanced in their discussions on the modalities for market access offers, but the FICs would not be expected to eliminate tariffs on all goods originating from Australia and New Zealand. He noted that under the “substantially all the trade” test, the FICs would normally be required to eliminate duties and other restrictive regulations of commerce on at least 80 per cent of the volume of trade between them and Australia and New Zealand. He also pointed out that the FICs would be able to benefit from stand-still provisions and longer transitional periods to implement tariff cuts. Session Ten: Status of the PACER Plus Negotiations on Trade in Services

61. The objective of the negotiations on trade in services was to create a secure and predictable framework which would enable the FICs to attract investment into the critical sectors of their economies such as financial services, telecommunications, energy and tourism. The CTA noted that although the FICs had the potential to develop niche markets for high value quality goods provided the right mix of development assistance and enabling domestic trade framework was present, it was in the area of trade in services and investments where they had the most to gain from the PACER Plus negotiations. The share of services in the GDP of most FICs already exceeded that of trade in goods. In the negotiations on trade in services under PACER Plus, the FICs intended to request Australia and New Zealand to assist in the development of their services sectors, particularly tourism and other sectors in which they had a comparative advantage. Commitments in services had to be carefully crafted in order to attract FDI and transfer of knowledge and skills.

62. Addressing views earlier expressed that public utilities should be excluded from the coverage of the Services Chapter, the CTA said that it would be within the rights of every Party to exclude certain sensitive sectors from the coverage of the agreement. There would be no requirement for any Party to deregulate or privatise any public utility. There was also the general acceptance that the FICs would liberalise fewer sectors than Australia and New Zealand. The CTA said that it was premature at this stage of the negotiations to make the case for the exclusion of any sector from the coverage of the agreement. The purpose of PACER Plus was to create a competitive environment within which companies in the PACER Plus would flourish and expand business opportunities. The exclusion of a particular sector from the coverage of the agreement did not necessarily mean that it would benefit a country. It was necessary for countries to have a long term view taking into account their infrastructural challenges. He said that commitments in a sensitive sector such as energy could actually be beneficial in generating economic activity with spillover effects for trade in goods. He further explained that there existed a symbiotic relationship between services and investments and trade in general. In response to a question on the offensive interests of the FICs in the services negotiations, the CTA said that the FICs would like Australia and New Zealand to adopt measures that would encourage their service suppliers to invest in their economies and also assist them to strengthen their regulatory frameworks.
Session Eleven: Status of the PACER Plus Negotiations on Investment

63. An agreement on investments under PACER Plus would set out a framework of laws regulating FDI that would complement those already existing in some FICs. The CTA stressed that the main objective of such an agreement with Australia and New Zealand would be to enhance the credibility of the investment regimes of FICs and facilitate greater investment flows. Like in the services negotiations, the FICs were requesting Australia and New Zealand to provide incentives to their businesses to invest in the Pacific region. The CTA, however, noted that the FICs had a responsibility to create an enabling environment to attract investment. They should implement coherent domestic policies and also ensure their security in their countries. From a defensive perspective, the CTA said that the FICs would like to be able to reserve certain sectors for only their citizens. He noted that there was an emerging consensus that the text should not include an investor-state dispute settlement mechanism. The Parties were currently discussing what would be the most optimal dispute resolution mechanism.

64. During the discussions, some participants questioned the capacity of FICs’ governments to schedule commitments in services and investments in such a way to advance their development objectives and provide an adequate level of protection to domestic sectors. The CTA acknowledged some of the difficulties the FICs might have in these areas and informed them that OCTA had secured assistance from the Trade Advocacy Fund (TAF) under the auspices of DfID for a project aimed at helping the FICs to analyse their regulatory frameworks and schedule commitments in services and investments under PACER Plus.
Session Twelve: Evaluation and General Observations and Follow-up Activities

65. Several interventions were made questioning what Australia and New Zealand’s intentions were in pursuing PACER Plus, and whether the FICs would be able to take advantage of the Agreement considering the state of their economies. The CTA noted that if the FICs were to achieve robust economic growth and sustainable development, it would benefit Australia and New Zealand in the medium to long term. He believed that Australia and New Zealand genuinely wanted to see development across the Pacific and that they appeared to be convinced that it was through trade and not aid that would enable the FICs to attain long-term development.

66. A number of participants expressed doubts about the ability of their governments to represent effectively their interests and concerns given the low engagement with NSAs on PACER Plus. Some questioned the notion of inclusiveness of PACER Plus and whether the one-size-fits all approach was appropriate in view of the divergences among FICs. The independence of OCTA was raised considering that its core funding was provided by Australia and New Zealand. The CTA said that the OCTA was independent and accountable only to the Governing Board, which was comprised of representatives from FICs. He said that Australia and New Zealand had never sought to influence the OCTA on any issue and gave them credit for their respect of the independence of the Office.

67. NSA representatives commended the OCTA for having organised the workshop. For some participants, they said that since the beginning of the PACER Plus dialogues, this was the first time that they had been briefed in such a transparent and comprehensive manner. Some said that they had come to the workshop knowing very little about PACER Plus and were leaving with an understanding that would allow them to better represent their stakeholders and articulate their concerns and interests and engage with their national governments. They invited OCTA to continue such engagement with NSAs both at the national and regional level.

68. In his concluding remarks, the CTA thanked all the participants for their active engagement and invited them to contact OCTA should they need any information about PACER Plus. He said that the workshop had been very useful for OCTA as it had enhanced its understanding of the concerns and interests of national and regional NSAs. 69. The workshop was concluded with a prayer by Rev. Hariesa Faitala of Niue.