Free vs Fair Trade in the Pacific - Barry Coates


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Barry Coates (Executive Director, Oxfam NZ) examines PACER-Plus, the free trade agreement currently being negotiated between the nations of the Pacific. See for more info

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Free vs Fair Trade in the Pacific - Barry Coates

  1. 1. Trade Negotiations in the Pacific May 2011
  2. 2. Development Challenges for the Pacific• High proportion of subsistence agriculture• Weak economic infrastructure• Inadequate education and training• Unsustainability and inequity in use of natural resources• Rising income inequality and social unrest• Instability and low government accountability• High level of remittances and aid• High vulnerability to disasters and crises
  3. 3. The Pacific also has unique strengths• A high level of social capital• Community resilience• Strong and living Pacific cultures• Traditional knowledge and biological diversity• Natural resources: – Tuna fishery – Minerals – Forests – Oceans• Beaches, scenery and coral reefs
  4. 4. Support a rightsbased approachto developmentEveryone has the right to... Livelihoods Services Security a Voice and an Identity
  5. 5. How countries developLessons from economic history:• Provide space for industries to develop• Build economic infrastructure• Build competitiveness through time, scale, experience• Support international networks• Open domestic markets up graduallyBuild accountability and active civil society to avoid government capture by interest groups
  6. 6. Work from the grassroots
  7. 7. Oxfam research – Learning from Experience Purpose:• Define critical success factors for sustainable economic development• Understand link to poverty reduction• Identify constraints• Focus on Pacific strengths• Listen and learn
  8. 8. Key success factorsOvercoming inherent constraints: communications, transport, trade barriers, inconsistent supply• Accessing higher value markets• Niche marketing; certifications, value-adding and development of a brand• Partnering with growers• Improving producer’s incomes• Support for scale-up
  9. 9. Potential directions for development• Revive import substitution, especially to improve health and improve food security• Add value to agriculture: – Processing – higher value niche markets eg. organics, fair trade, supply to Pacific diaspora, etc• Derive more benefit from natural resources and regulate for sustainability• Develop economic base and SMEs• Enhance the policy and economic space for future development
  10. 10. International trade context• The WTO Uruguay Round and extension of WTO mandate (services, IPRs, investment)• Doha negotiations• WTO accession• The plethora of FTAs• Pacific Economic Partnership Agreements (EPAs)• Agricultural subsidies and protectionism during economic crisis• Barriers to exports from the Pacfiic
  11. 11. Trade Negotiations in the PacificThe Pacific faces a huge agenda of trade negotiations, including:• WTO negotiations affecting members (PNG, Fiji, Solomons, Tonga)• Complex negotiations for WTO entry (Vanuatu, Samoa)• PICTA (Pacific Island Countries Trade Agreement) negotiations on services and extension to other countries• EPA (Economic Partnership Agreement) being negotiated between the EU and Pacific Island Countries• PACER (Pacific Agreement on Closer Economic Relations) with NZ and Australia who are mounting pressure for negotiations to start• A push for economic integration in the Pacific Plan, including “a comprehensive framework for trade and economic cooperation” including Australia and New ZealandThe extent and timeframes of the negotiations are beyond the capacity of Pacific countries to negotiate effectivelyThere has been little research of potential impacts, particularly social, cultural and environmental impacts, or analysis of alternatives
  12. 12. PACER - backgroundSuccessor agreement to SPARTECA which came into force in 1980 allowing duty free access for PIC exports• with restrictive rules of origin• consultations are underway on possible reformPACER came into force October 2002, includes: Australia, Cooks, Fiji, Kiribati, Nauru, NZ, Niue, PNG, Samoa, Solomons and Tonga• RMI, Palau, Tuvalu, and Vanuatu have signed but not ratified• FSM have not signedIncludes a trade facilitation programme currently underwayCovers goods only, but A/NZ want services, investment and other aspects as well
  13. 13. PACER – possible costs• Loss of government revenue, especially for Samoa, Vanuatu, Tonga & Kiribati• Regressive effect from indirect taxes• Increased competition for local producers from imports from Australia and NZ• Few alternatives for workers and business to move to a more competitive sector• A/NZ companies with manufacturing in the Pacific may go home and export instead – eg. breweries• Increased dependence on imported food (often of low quality) raising questions of health and food security• Restrictions on Pacific governments being able to nurture new enterprises and industries• Dangers from services, investment, intellectual property rights, procurement, etc.
  14. 14. Impacts: Loss of government revenueThe IMF has undertaken a study of the impact of trade liberalisation on government revenues and found that the value added or consumption taxes in poorer countries raised only 30% of the amount of tax lost from tariffsThese tax reforms put more of the burden on the poorThe trade agreements under negotiation will drastically reduce tariffs, and will not allow governments to raise them in future, even if there is a financial crisisThis will be a major problem for many PICs that derive over half their revenue from tariffsThis is likely to result in severe cuts to essential services including health care, education, water and sanitation
  15. 15. Revenue loss as a proportion of government revenue PICTA EPA PACER US MFN TotalPNG 0 0 2 0 2Fiji 0 0 3 0 3Samoa 1 0 12 3 18Vanuatu 2 1 18 0 22Solomons 1 0 4 0 6FSM 0 0 1 6 8Cooks 2 0 6 0 8Tonga 6 0 19 2 27Palau 0 0 0 4 4Marshalls 0 0 5 20 25Kiribati 4 0 15 0 19Tuvalu 8 0 5 0 14Niue 0 0 7 0 7Nauru 0 0 6 0 6Source: Responding to the Revenue Consequences of Trade Reform in the FICs, PIFS August 2007
  16. 16. PACER – possible benefits• Rules of Origin improvements for exporters• Labour mobility (eg. NZ seasonal work scheme), possibly linked to support for training• Trade-related development cooperation and funding such as: - infrastructure funding - help meeting hygiene standards & customs requirements - marketing in A/NZ• Lower prices for imported A/NZ goods for Pacific consumers• Increased funding to build PIC capacity to trade
  17. 17. AlternativesThe Pacific is faced with many pressures and apparently one right answer; economic liberalisationThe promises of unregulated globalisation are now discreditedAn alternative Pacific economic agenda should start with:• Practical support for custom and informal economies• Support for small locally-owned business• Delivering on people’s rights to essential services such as clean water, affordable education and adequate health care• Building up Pacific infrastructure including investing in transport links, access to markets, education for all and vocational training• Investing in vocational education, training and managerial skills• Laws and policies that protect natural resources, cultural traditions and indigenous knowledge and gain a fair share from their use• Developing viable economic options for the Pacific, rather than a naïve faith in opening up the economy• Putting the onus on the rich countries to play their role in ending unfair trade rules, climate change and exploitation of the Pacific
  18. 18. So what can you do?Listen to allies in the PacificWrite to the Government:• Send in a submission• Call for support for an independent negotiator• Include Fiji in negotiations• Provide support to the Pacific to develop their own alternatives• Do an ‘early harvest on RoO and SPSBuy fair trade and do a Coffee BreakFind out more and get involvedTell others; that’s how change happens!