Balancing Trade and Aid


In a recent article in, titled What’s So New About Rudd’s Pacific Policy?, Maureen Penjueli and Wesley Morgan pose the question: Does the Rudd Government have the will to address the development needs of the region, independently of the Government’s desire for access to Pacific markets through free trade agreements?

As the person responsible for Pacific Island Affairs in the Rudd Government, I would argue that development needs in the Pacific are not mutually independent of free trade. I would also argue that achieving long lasting development outcomes in the Pacific is exactly what the Rudd Government is dedicated to.

Our government is committed to a partnership approach to the region, tackling issues of aid, trade and broader socio-economic development. This approach, based on mutual respect and responsibility with the region is also informed by the developmental experience of the two most "developed" countries in the region — namely New Zealand and Australia.

Australia’s sustained growth and prosperity over the last twenty years cannot simply be put down to the mining boom we have experienced in the last ten. The Australian and New Zealand economies were fundamentally and irreversibly changed for the better through the reforms designed and implemented during the Hawke/Keating and Lange/Douglas periods.

These economic reforms included micro and macro economic, industry and trade reforms. Prior to these reforms both economies were sluggish, inefficient and without innovation — oriented around legacy systems and the structures of their colonial past. Such systems, often using protection and subsidies, masked real imbalances of trade, economic and political power. Freeing up trade has changed this. Free trade has resulted in far more jobs, far more wealth, far more opportunities and far more aspiration than was ever imagined in the past of either country.

While free trade agreements remove the barriers on the free flow of goods, services and capital, it is the freeing of the dependency mindset — opening up opportunities for people to aspire to not only lift themselves out of poverty, but improve the lot of future generations — that is the fundamental reason we are so keen to pursue PACER Plus.

As Penjueli and Morgan point out — there are currently very few barriers stopping Pacific goods and services entering the Australian market.

I am of the strong belief that what actually stops the Pacific from taking up opportunities in Australia and New Zealand are public and private institutions moulded by years of trade subsidies and aid dependency. The distortion of incentives that such policies have created, rather than helping people and industries (as often argued by proponents of the status quo), actually protect the vested interests of a few (state owned enterprises, protected industries, elites) to the detriment of the majority. Are we really serious about improving things in the Pacific or do we just want to keep developing commodity-based economies to satisfy our own demand for a cheap coffee?

This is not to say that such changes will not come without some pain — all reforms do. However, as Simon Crean, Bob McMullan and I have said on many occasions, Australia stands ready to support the region through such tough transitions.

It is all too easy to compartmentalise each part of Australia’s approach to the Pacific into specific areas, such as trade, aid, regional and bilateral relations. However this government is doing things differently. This government is committed to an approach that not only improves millennium development goal indicators in the region, but also the future opportunities and sustainable options for its people.

It is about a commitment to the Pacific that is not based on our differences (as arguably many previous policies have been), but rather upon what we share.

It is our belief that by breaking the shackles of what has defined the Pacific in their colonial past, we can empower the region to take on the future. A future that is common to all of us.

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