PACER Plus to Build Dynamic Economies

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Island Business interviewed the Chief Trade Adviser (Dr. Edwini Kessie) on the 14th of January, 2016 concerning the PACER Plus agreement and its ability to attract foreign direct investment for the Forum Island Countries (FICs).

The Pacer Plus agreement can enhance the ability of the Forum Island Countries (FICs) to attract foreign direct investment into the critical sectors of their economies says Dr Edwini Kessie, Chief Trade Adviser for Pacific Island Countries.

Dr Kessie refuted allegations that PACER Plus will cause the closure of businesses and exacerbating unemployment problem in the FICs as ‘erroneous and predicated on the assumption that the Forum Island Countries will have to eliminate all their duties.”

IB: What is the outlook for the PACER Plus negotiations?

Dr. Kessie: The Parties are committed to fulfilling the Leaders’ directive to complete the negotiations by June 2016. They will focus in the coming months on resolving the outstanding issues in the Legal Texts and progress work on the exchange of offers in trade in goods, trade in services, investment and the movement of natural persons.

IB: Do you think this deadline can be met?

Dr. Kessie :The Parties intend to comply with the Leaders’ mandate, so they are working to completing the negotiations by June 2016. It is possible that they may decide to extend the deadline for a few months to achieve a high quality agreement that would enhance the participation of the Forum Island Countries in international trade.

IB: At the recent intersessional meeting in Fiji in December 2015, the Fijian Trade Minister criticised the OCTA for its conduct of the negotiations? Are these criticisms justified?

Dr. Kessie :After the statement by the Minister, the Lead Spokesperson of the Forum Island Countries on PACER Plus matters decided to solicit the views of the Forum Island Countries on the matters raised by the Minister. Almost all the countries which took the floor did not agree with his views on the role of the OCTA in the negotiations. They credited the OCTA for the progress in the negotiations and said that it only facilitated consensus among the Forum Island Countries on the negotiating issues. They reaffirmed their commitment to the PACER Plus negotiations and stressed the need to fulfil the directions of Trade Ministers and Leaders to complete the negotiations by June 2016.

IB: There is a view that the PACER Plus Agreement is not balanced and will only give Australia and New Zealand an unfettered access to the markets of the Forum Island Countries. What do you say that?

Dr. Kessie :There is no basis for this statement. In Trade in Goods, whereas Australia and New Zealand have committed to binding all their tariffs at zero, the FICs would have the flexibility not to reduce tariffs on their most sensitive products, including high revenue-generating items. Thus the Parties would be assuming asymmetrical obligations. There is no requirement that the Forum island Countries should eliminate all their duties. Estimates of tariff losses made by some NGOs are exaggerated in that respect. There will be provisions in the Agreement which would enable the Forum Island Countries to give protection to their infant industries. In the areas of trade in services and investment, there is agreement among the Parties to use a positive list to schedule their commitments. This essentially means that countries will have the right to select which sectors they want to give commitments and impose any limitations or restrictions.

IB: It has been reported that the right of the Forum Island countries to regulate would be severely circumscribed by the PACER Plus Agreement. Is that correct?

Dr. Kessie :There is also no substance to this claim. The Trade in Services agreement expressly recognises the right of countries to regulate in the national interest. However, they should not do so in such a way as to negate their market access commitments or discriminate among the PACER Plus Parties. The language in the Trade in Services Chapter is identical to the language found in PICTA and numerous trade agreements. The language does not in any way impinge on the right of a country to regulate trade in services in its territory.

IB: It has been alleged that PACER Plus will lead to the closure of businesses and exacerbate the unemployment problem in the Forum Island Countries. What are your views on this?

Dr. Kessie :This view is erroneous and predicated on the assumption that the Forum Island Countries will have to eliminate all their duties. As previously noted, they will have the ability not to reduce tariffs on their most sensitive products, including high-revenue generating items. Furthermore, there will be provisions in the agreement to enable them to take measures to protect their infant industries. Thus, the idea that PACER Plus will lead to closure of businesses is simply not true. By contrast, the Agreement can enhance the ability of the Forum Island Countries to attract foreign direct investment into the critical sectors of their economies. This can lead to job creation and provide a boost to economic growth and the sustainable development of the Forum Island Countries. It is well established that countries which have been able to attract foreign direct investment have increased their participation in international trade and in the process generated high paying jobs in their economies. The Arrangement on Labour Mobility can provide opportunities for thousands of unemployed people in the Forum Island Countries to go to Australia and New Zealand to work for six to nine months each year, who upon their return can establish businesses which can contribute to the economic growth of their countries and provide jobs for many people. Thus PACER Plus should be seen as an opportunity for the Forum Island Countries to have dynamic economies which would create high-paying jobs and raise the living standards of their people.

IB: There is the view that Australia and New Zealand would not be undertaking binding commitments in PACER Plus. Is that correct?

Dr. Kessie :That is certainly not true. Australia and New Zealand will be undertaking legally binding commitments in all the areas where the Forum Island Countries will also be undertaking binding commitments. While it is true that the Forum Island Countries have duty-free, quota-free access to the Australian and New Zealand markets under SPARTECA, these preferences are not legally binding and can be revoked at any time. Under PACER Plus, they have undertaken a legally binding commitment to maintain all their tariffs at zero. The security and predictability of market access is good news for businesses in the Pacific, which can make the necessary investment decisions to expand production for export to these two key markets. While it is true that Australia and New Zealand have not undertaken binding legal commitments in the areas of labour mobility and development assistance, it is important to note that the Forum Island Countries will not be undertaking any obligations in these two areas. Furthermore, there is no reason to doubt the sincerity of Australia and New Zealand in relation to the commitments they have undertaken in these two areas. There is hardly any free trade agreement which contains binding commitments in these two areas. The actions of Australia and New Zealand in these two areas speak for themselves. Australia has eliminated the cap under the SWP and extended the scheme to the whole agricultural sector and also to the accommodation sector in selected locations. New Zealand has increased the cap from 8000 to 9500 and initiated pilot programmes in the construction and fisheries sectors for the benefit of the Forum Island Countries. They have also given a commitment to increase spending on Aid for Trade with a view to assisting the Forum Island Countries to address the numerous supply side constraints that have impeded their efforts to take advantage of market access opportunities under trade agreements. The Chapter will contain funding targets for the activities mutually agreed and prioritised by the Parties. The idea that it is only the Forum Island Countries which will be undertaking legally binding commitments is simply not accurate.

IB: What are the expectations from the next intersessional meeting which would be held in Brisbane in early March?

Dr. Kessie :The Parties would be looking at bridging the gaps in their positions on the negotiating issues and progressing work on the exchange of offers in Trade in Goods, Trade in Services, Movement of Natural Persons and Investment with a view to complying with the Leaders’ directive to complete the negotiations by June 2016.