Trade winds blowing guest worker’s boat

Labour mobility may be in the headlines but as Kevin Rudd talked the talk at the Pacific Islander Leaders’ forum in Nuie yesterday he would have had one thing on his mind - trade

Allowing Pacific workers to plug the holes in Australia’s labour market is certainly a priority for Australia’s farmers. But the real gain for Rudd lies in the bargaining power the scheme will give Simon Crean as he moves into the second phase of the Pacific Economic Cooperation Agreement (PACER plus) negotiations, the free trade agreement Australia and New Zealand are negotiating with the Pacific islands countries (PICs).

At $5 billion, annual trade with the Pacific is relatively small from Australia’s perspective. But for most PICs, Australia remains their largest trading partner. Australia’s dominance in the Pacific however is increasingly under threat from Asia’s emerging economies and most recently by the European Union’s efforts to establish an economic partnership agreement in the Pacific.

In an area traditionally considered Australia’s own “back yard” this has caused some concern and made PACER plus a key priority for the Rudd Government.

The PICs however are wary of PACER plus and with good reason. Reducing tariffs will make it very difficult for local producers to compete alongside Australian imports, especially on products such as textiles, clothing and footwear.

Moreover, according to a recent report by the Washington DC-based Nathan Associates some Pacific states would lose as much as $10 million in government revenue under a PACER plus-style agreement, very little of which could be recouped through other means.

As Pacific exports already receive duty-free entry into Australia, Australia has very little to offer in terms of trade concessions: which is why Rudd will be championing Australia’s seasonal labour scheme and bilateral aid program at the Pacific leader’s forum.

Australia is of course under pressure both at home and in the Pacific not to make its labour scheme conditional on a PACER plus outcome.

Even on the remote chance Rudd does agree to this, the not so subtle message behind the “trial” nature of the scheme will be obvious to all Pacific leaders. Play ball on PACER or go it alone.

It’s an approach that strongly resembles the “aid for trade” model heavily promoted within the WTO. Developing countries that liberalise their economies are rewarded with aid packages designed to “minimise the adjustment costs” associated with rapid liberalistion and allow them to “maximise the benefits” of new market access.

An expanded aid program will help overcome the revenue loss for Pacific governments and the labour mobility scheme will take the edge off any unemployment which occurs as domestic producers become displaced by Australian imports.

Or so the theory goes.