Prising Open The Pacific: New Trade Deals Reflect Old Agendas

[Bill Rosenberg <w.rosenberg@xxxxxxxxxxxxxxxxxxx>]

"At Nauru President Tebururo Tito of Kiribati warned: 'Globalisation and
economic liberalisation ...may create untameable and unpredictable free
market forces.  These forces, in my view, steer the most powerful economies
on earth in a direction that could take humankind back to the sociologists'
adaptation of Darwin's theory of the survival of the fittest where life for
the weak and the poor in the family, village and society is more precarious
than that for the strong and powerful.  I believe that this is the most
important ideological challenge for the leaders in our region over the next
decade.'"

-------- Original Message --------

(Upcoming ZNet Commentary for September, www.zmag.org)
Prising Open The Pacific: New Trade Deals Reflect Old Agendas

By Aziz Choudry

The winds of change, so the cliché goes, are blowing across the Pacific. Yet
looking at the background to two regional trade agreements launched in
August makes me think that sometimes the more things change, the more they
stay the same.

When the world's tiniest republic hosted the 32nd Leaders Summit of the
Pacific Islands Forum (formerly the South Pacific Forum) last month, free
trade was on the agenda. Facing imminent depletion of the high quality
phosphate reserves on which its economy is based, most of Nauru resembles a
mined-out moonscape. Many fear our entire planet may rapidly meet a similar
fate due to the dominant model of "development" that has spread its
tentacles far and wide.

Sri Lankan jurist Christopher Weeramantry, who chaired a Commission of
Inquiry on Nauru, 3000 km northeast of Australia, concluded that the
island's "wealth and very substance were scattered throughout the world in
the form of cheap fertilisers which helped grow food not only for particular
countries but through them for all the world". Nauru's history until
independence in 1968 was one of colonial exploitation, social and
environmental devastation, and great profits for the British, Australian and
New Zealand governments which jointly administered the island after a period
of German rule.  It now faces being wiped off the map by rising sea levels
due to global warming, rising unemployment after the downsizing of the
Government and Nauru Phosphate Corporation which provided 95% of all
employment, and threats of financial sanctions because of European
crackdowns on money laundering and tax haven operations. "Coca-colonisation"
has seen healthier traditional diets displaced by processed foods, imported
mainly from Australia. Nauruans are the world's most diabetes-ridden people.

Just as forces outside the Pacific wrought the destruction in Nauru for
their own benefit, recent moves to create a regional free trade area to
"ease" the island nations' "smooth and gradual integration into the world
economy" are being imposed from beyond the islands.  Just as the British,
French and German empires divided the Pacific into spheres of influence by
an arbitrary line, the imperial tussles of the 19th century are now being
mirrored by the jockeying of bigger powers to protect their political and
economic interests in the region.  Here, the place of the colonial powers of
yesteryear has been taken by the European Union (EU), Australia, and New
Zealand.

Last month, Fiji's former president Ratu Sir Kamisese Mara forcefully
criticised Australia and New Zealand - the Forum's "metropolitan members."
"They have sought to impose their solutions in an insensitive way, when left
to ourselves we could work things out in what we have come to call the
Pacific Way."

"The Forum comes complete with some crazy maths", writes New Zealand
journalist, Michael Field. "The Marshall Islands has just 181 sq km of land,
a third the size of Singapore, and none of it more than 5m above sea-level,
yet it sits in an exclusive economic zone the size of Greenland.  So small
are the states that the populations of five of the smallest combined would
nearly half fill Sydney's Olympic Stadium. Australia, New Zealand and Papua
New Guinea make up 93 per cent of the forum's population and 99 per cent of
the land area".

High-level statements about special "development challenges" and
vulnerabilities faced by developing small island states are ubiquitous.
They're in numerous UN and Commonwealth Secretariat documents.  Former New
Zealand politician, WTO Director General Mike Moore acknowledged "problems
of small and vulnerable countries with scarce resources" in a video link to
participants in a joint Pacific Island Forum/WTO trade policy course held in
Fiji this March.  Predictably, he thinks their problems are best addressed
in the context of a new round of WTO talks.

The Asian Development Bank (ADB), a major multilateral donor in the Pacific,
classifies the special circumstances of Pacific Developing Member Countries
to include "smallness, remoteness from major markets, geographic
fragmentation, economic vulnerability (because of reliance on a narrow range
of primary product exports, aid, and/or remittances), and environmental
vulnerability."

The Lome Convention defining the relations between the EU and the now 77
States of Africa, the Caribbean and the Pacific (ACP) was initially signed
in 1975.  Lome combined a trade regime of preferential access to the
European market for ACP products with a financial and technical aid package.
Since the Cold War, the EU has focused more closely on Eastern Europe and
the Mediterranean while trying to shore up its other international political
and economic interests.

Under the Cotonou agreement signed last year between the EU and ACP, the
system of trade preferences which the EU had granted will gradually be
replaced by a series of new economic partnerships - free trade agreements.
Formal negotiations for these will begin in September 2002, to take effect
by January 2008.

The ACP Secretariat says Cotonou was shaped by "the EU's need to restore its
credibility as a 'global player' in aid and development" after Seattle and
other events. The WTO had pressured the EU to radically reform Lome's
provisions. Cotonou defines the negotiating framework to enable the regional
sub-groups or individual countries within the ACP and the EU to conclude new
WTO-compatible trade agreements. A major power imbalance has always
underscored EU-ACP trade and economic relations.  This can only worsen.

Against a backdrop of pressure from the EU, Australia and New Zealand, and
multilateral financial institutions like the ADB, in 1999 Forum Island
leaders endorsed the development of a Pacific regional free trade agreement
and tasked the Forum Secretariat to prepare a text. This was closely based
on recommendations of a 1998 report by Robert Scollay, Director of Auckland
University's APEC Study Centre.

Forum Secretary-General Noel Levi has sought to brand the concept of a
regional free trade agreement as a regional initiative. He claims that the
"vision of trade and economic integration" had been the basis for the
Forum's creation 30 years ago.

However, Fijian activist/academic Claire Slatter believes that the attempt
to market the regional free trade agreement "as the culmination of a
regional dream is aimed at legitimating the...proposal and engendering
region-wide political support - the idea that regional interests, as opposed
to external ones, are being realised here is intended to create a strong
sense of ownership among Pacific governments.  The emergence of discordant
thinking within the South Pacific Forum since 1997, and steadily growing
criticism from NGOs and leaders of other regional institutions and
organisations about the programme of economic restructuring being undertaken
in the region under its direction and leadership, have made ownership and
legitimacy key concerns of the Forum Secretariat since 1999."

Controversy and tension surrounded the nature of Australia and New Zealand
involvement in any eventual free trade agreement. New Zealand government
documents show that the Melanesian Spearhead Group countries (Fiji, Papua
New Guinea, Solomon Islands and Vanuatu) and the small island states were
concerned at the impact on small and fragile economies of opening up to
competition from larger countries, and wanted Australia and New Zealand -
the economic heavyweights in the South Pacific - to be separate signatories
to a separate protocol.  Australia and New Zealand had sought to be full
participants and parties principal at any negotiations.

So two agreements were approved at Nauru. The Pacific Agreement on Closer
Economic Relations (PACER), is not a free trade agreement as such but an
"umbrella" framework agreement for future free trade agreements and economic
relations in the region as a whole - including Australia and New Zealand.
It provides for cooperation on trade facilitation and financial and
technical assistance including in the areas of trade facilitation and
promotion, capacity building and structural adjustment. PACER allows for the
start of negotiations of Forum-wide free trade arrangements no later than 8
years after PICTA enters into force.  Should Forum Island Countries (FICs)
wish to start free trade negotiations with developed countries (like the EU)
they must first approach Australia and New Zealand to make sure they do not
miss out.  PACER, its proponents say, supposedly allows for Pacific Island
nations to conclude trade agreements at their own pace.  Such statements
ignore the fact that commitments to start free trade negotiations next year
with the EU - thus triggering talks with Australia and New Zealand - have
already been made.

PICTA (Pacific Island Countries Trade Agreement) is a goods-only agreement,
which will come into force after six countries have ratified it.  Goods
trade liberalisation will take place among the 14 FICs over an 8-year period
to 2010 for developing countries, and 2012 for Small Island States and Least
Developed Countries.  Protection of sensitive industries will be maintained
over a longer period, by country-specific "negative" lists to be eliminated
by 2016.  Eventually these agreements can be extended to cover services and
investment liberalisation.

Like Cotonou, the trade arrangements are presented as "stepping stones" to
allow FICs to gradually become part of a single regional market and
integrate into the global economy.

New Zealand government documents show alarm and indignation about the
prospect of being excluded from a Pacific regional agreement, and the EU
clinching a free trade deal allowing its exports better market access in the
Pacific islands than its own. "We have important trade, economic and
investment relations with the South Pacific." New Zealand and Australia
waged a "concerted effort" to preserve their interests through the
PACER/PICTA package. Both are ardent advocates of trade and investment
liberalisation.

An important objective for Australia and New Zealand has been to ensure that
their trading interests in Forum Island markets are adequately defended
should FICs begin free trade negotiations with non-Forum partners. Australia
and New Zealand "can accept FICs-only liberalisation as a first step so long
as our situation vis-a-vis third parties is safeguarded." said New Zealand
officials.

The Pacific Islands are a valuable market for Australia and New Zealand,
whose products have long flooded into the region.  For exporting FICs like
Fiji and the Solomon Islands, tariff cuts in Australia effectively spell an
end to preferential trade arrangements that have helped them develop their
industries.  Pacific countries, few of which enjoyed preferential access to
European markets in the first place, have no real prospect of gaining
further EU market access.  The balance of trade between Australia/New
Zealand and the Pacific Islands has always been unequal.  In the year to
June 2000, New Zealand received NZ$ 129 million in imports from Forum Island
Countries, while its exports to them totaled $490 million.  Australia's
trade with the region is worth A$ 1.5 billion annually.

Many island countries depend greatly for their government revenue on customs
duties.  According to a 1998 report tariffs represented 64% of the total tax
revenue in Kiribati, 57% in Vanuatu, and 46% in Tuvalu. Value Added Tax or
Goods and Services Tax are being advanced as alternative revenue sources.
Social budgets will be first to feel the pinch.

At Nauru President Tebururo Tito of Kiribati warned: "Globalisation and
economic liberalisation ...may create untameable and unpredictable free
market forces.  These forces, in my view, steer the most powerful economies
on earth in a direction that could take humankind back to the sociologists'
adaptation of Darwin's theory of the survival of the fittest where life for
the weak and the poor in the family, village and society is more precarious
than that for the strong and powerful.  I believe that this is the most
important ideological challenge for the leaders in our region over the next
decade."

The structural adjustment programmes applied to the islands will arguably
have a much greater impact than the new trade deals.  But these agreements
will help to lock in economic reforms.  The EU sees its new agreements
acting as an "anchor" for this purpose.

External pressure to prise open these small island economies and the
region's fragile ecosystem to the global market smacks of the same callous
disregard with which the Pacific and its peoples have long been treated by
Pacific Rim powers and Europe.  Pacific peoples still have little input into
the development of the macroeconomic policies sold to them as the only
alternative.

Fine words about "special circumstances" and vulnerabilities of developing
small island states are frequently used to justify external intervention and
to disempower the very countries to which they refer. Such noises of concern
mean little when backed by pressure to conform to economic policies that
have already been tried, tested and failed elsewhere.

Nauru's President Rene Harris recently warned that failure to address global
warming and rising sea levels would lead to a "modern holocaust" for the
Pacific's low-lying islands.  The Pacific certainly doesn't deserve to be
locked into a neoliberal nightmare.