Warning for Pacific development

The notion of seeing the Pacific Islands as part of Australia's 'pond' is still alive in Australian politics as it seeks to ensure that European companies don't get the upper hand in the region.

Next week as officials from Australia, New Zealand and the Pacific Islands sit down to negotiate a trade agreement, Australia will be keeping one eye on how negotiations are progressing with Europe. The officials are meeting in Brisbane to continue negotiations on the regional free trade agreement known as PACER-Plus, an agreement Australia hopes will ensure its companies don't lose out from any European competition.

The Pacific Islands are currently negotiating free trade agreements with the European Union, negotiations that triggered Australia and New Zealand demanding the same. Currently only Fiji and Papua New Guinea have signed interim agreements with the EU but a deadline has been set for the end of this year to finalise agreement with all Pacific Island Countries.

Despite all of Australia's rhetoric about PACER-Plus being about supporting development in the Pacific, it also is about ensuring market access to the region by Australian firms isn't lost.

In its brief to the incoming government in 2010 the Department of Foreign Affairs and Trade (DFAT) articulated that its aims under PACER-Plus are “to strengthen the [Islands] economies and ensure Australia receives no less favorable treatment than that given to others, such as the European Union.” Greens Senator Lee Rhiannon also acknowledged this in recent questioning of top DFAT officials, however they acknowledged that such equal access could be negotiated with some limited “exclusions”.

This is a far cry from Australia's previous statements on PACER-Plus that “there is nothing in this for us”.

Australia is watching with a keen eye the negotiations that are happening with the European Union and the Pacific aware that anything offered up to the Europeans as being the minimum basis for any agreement with Australia. Given the importance of the economic relationship between the Pacific countries and their bigger regional neighbors, any commitments made with Europe will have much greater impacts once applied to Australia and New Zealand.

Both sets of negotiations are coming with the usual rhetoric about how this will bring development to the Pacific, a type of 'development' that is being painfully felt right now in Tonga. Tonga became a member of the World Trade Organization under what has been described as the “worst” terms of any country. So confident in the benefits that would come with liberalisation and lowering of tariffs the government argued that no future government would question WTO membership since the benefits would be “manifestly obvious for all”.

Sadly Tonga's current crisis is what is has become obvious for all. This is the sad promise for the Pacific, they are sold the idea that economic growth and liberalisation will bring them a new age of prosperity but all they seem to end up with is crisis. The same ideology that is being pushed around the region by major donors, regional and international institutions are the one responsible for the current economic woes gripping the planet.

Bodies like the WTO, World Bank, Asia Development Bank and the International Monetary Fund have long championed reckless liberalisation (especially in areas of food and financial services) in the belief that it would bring riches to all, encouraging countries to bind themselves to such commitments.

So major is the crisis in Tonga that the Reserve Bank Governor has urged Tongans to support the economy by buying locally produced foods and goods. Tonga's commitments under the World Trade Organisation mean that the government has lost the ability to support that idea through regulatory and legislative means. Ensuring foreign investment uses local resources would be a great way to maximise the benefits for a small island state like Tonga, sadly this is no longer possible due to the binding rules of the world trading system.

The predicament that Tonga finds itself in should sound a warning to the Pacific nations, especially Vanuatu and Samoa who are also considering WTO accession. The current trade negotiations with the European Union and Australia and New Zealand have the potential to tear open Pacific markets for the benefits of foreign companies, with limited ways to ensure any benefits are maximised.