Difficult times lie ahead for trade from small and isolated nations such as New Zealand. Consumers in Europe are starting to avoid our lamb and other exports because of concerns over long distance transport. Labels that count ‘food miles’ are motivated by concerns over climate change but give a misguided picture of the real carbon impacts. And there has been little progress in reducing the damaging agriculture subsidies of the US and EU. The World Trade Organisation’s Doha round of trade talks is stalled, held hostage by agriculture lobby groups.
We may be victims of unjust trade rules, but spare a thought for our even smaller and more isolated Pacific neighbours. They other challenges as well - the coup in Fiji, tsunami in the Solomons, riots in Nuku’alofa and Honiara, growing violence in the run up to elections in PNG and the prospect of more cyclones, sea level rise and other consequences of climate change.
Meanwhile foreign companies exploit their fish, timber and minerals, fuel corruption and charge exhorbitant prices for electricity, telecommunications and water. Struggling exporters face high transport costs as a result of oil price rises. It is little wonder that our Pacific neighbours, particularly the poorer Melanesian countries, can’t create enough jobs for the large numbers of young people in their societies.
So what is our response? On one hand we have just increased the aid budget and we are helping more Pacific workers to enter New Zealand on temporary work visas.
This is welcome. But our trade policy is out of step. This week, the Minister of Trade, Hon. Phil Goff announced that New Zealand and Australia will try to start preparations on a free trade agreement with the Pacific.
New Zealand’s rationale for starting negotiations under the Pacific Agreement on Closer Economic Relations (PACER) is commercial self-interest. Trade officials want to ensure that New Zealand exporters would not lose out if the Pacific gives duty free access to the EU. Pacific governments are negotiating hard with the EU and insisting that no deal is better than a bad deal. They are seeking tangible benefits for their people, not a free trade agreement to pry open their markets.
The immediate impacts of any agreement with the EU would not be ruinous for the Pacific, since they do little trade with the EU. But the impacts would be far more serious if there was a free trade deal with Australia and New Zealand, the Pacific’s main trading partners.
New Zealand exports to the Pacific are around $1 billion each year. But the Pacific exports only $160 million to New Zealand. This massive trade deficit is likely to worsen if the Pacific is required to drop their tariffs and open up their services under PACER. It is also likely to result in closures of local businesses and job losses because they are unable to compete with cheaper imports.
Nor is trade liberalisation going to meet the urgent need to deliver essential services. Pacific government revenues will fall when tariffs are removed under PACER, further squeezing under-funded health, education, water supply and other public services. There will also be pressure under PACER to deregulate these services and open them up to private sector. Yet few Pacific countries have sound regulatory systems in place. As New Zealanders know only too well, poorly regulated electricity, telecoms, water and housing means poor services, high prices and consumer rip-offs.
Some Pacific countries are already facing these issues through a different set of trade negotiations. Vanuatu, Tonga, and Samoa have been trying to join the WTO. But the price for entry to the WTO club is far higher for new members than for existing members. Even worse, there are no objective rules that limit what an existing member can demand as an entry price. Vanuatu was offered such a harsh deal that they withdrew just before they were due to join in 2001. Tonga’s deal has still not been ratified a year and a half after they finished negotiations.
Samoa is now in negotiations to join the WTO, and shamefully, it is their close neighbour and friend New Zealand that is making unreasonable and excessive demands. Our government is demanding that Samoa agree to trade concessions that go far beyond those of other Least Developed Countries, and even beyond those of far richer WTO members. These concessions are to benefit our exporters.
These free trade deals are not in the interests of our vulnerable Pacific neighbours. We should be offering the Pacific a development agreement that will help them be able to start new companies and add value to their agriculture and fish exports, not a free trade agreement to open up their markets.
It is time to have a coherent trade policy. We should give priority to development in the Pacific, not our commercial interests. A more prosperous, more peaceful and more sustainable Pacific is in all our interests.