We Are The Pacific's Best Frenemy


The story last week that more than half of Australia’s $400 million in aid to PNG was spent on consultants has had the unusual effect of actually putting the issue of our foreign aid on the agenda.

Following those reports came a call from the federal Deputy Opposition Leader Julie Bishop for an independent inquiry into the design and delivery of our foreign-aid program.

For his part, the Parliamentary Secretary for International Development Assistance, Bob McMullan, said he welcomed the increased media attention on the overseas aid budget, claiming it gives "those of us committed to the fight against global poverty the opportunity to make our case".

Certainly there is a lot to be done in the fight against poverty in our near region. The Australian aid agency, AusAID, estimates that one third of the population of the Pacific island countries to Australia’s north — roughly 2.7 million people — do not have the income or access to subsistence production to meet their basic human needs.

Rejecting Bishop’s claim that Australia’s aid priorities are being shifted away from poverty in our region and towards Africa and Latin America to support our bid for a UN Security Council seat, McMullan points out that Asia-Pacific remains the "principle focus" of Australia’s aid program. It’s also true that some of Australia’s aid to the Pacific islands is aimed at meeting the basic needs of people living in poverty. Australia provides more than half of all aid to the Pacific island countries, and McMullan is rightly proud that Australian aid has contributed to reducing the incidence of malaria in the Solomon Islands and Vanuatu, and improving education outcomes in Papua New Guinea (where currently less than half of all students finish primary school).

But alongside this benign aspect of Australia’s relationship with its poorer island neighbours is a more self-interested approach — one which suggests that neither Bishop nor McMullan are really doing as much as they could to address poverty in our region.

In 2009, the Australian Government launched negotiations for a free trade agreement (PACER Plus) in the hope of gaining increased access to Pacific markets — so Australian companies can sell more goods and services in the islands.

That plan was one the Rudd Government had inherited from its predecessors, who were very clear that a trade deal with the Pacific was about protecting Australia’s trade interests. Former foreign affairs minister Alexander Downer explained that the Pacific Agreement on Closer Economic Relations (PACER), the precursor to the current trade negotiations, "protects Australian interests in the event that Forum Island Countries begin negotiations for a free trade agreement or offer improved market access to another country".

When PACER was tabled in the Australian Parliament for ratification, an accompanying "national interest analysis" found that "without ratification of the PACER, Australia would be denied an enhanced opportunity to negotiate better market access to Pacific markets for Australian businesses and industry, while any other country could enjoy duty free access to FICs [Forum Island Countries] for their goods".

But somehow along the way, this self-serving trade deal got dressed up as an aid arrangement.

When Bob McMullan toured the Pacific last year, to try to convince island leaders to launch PACER Plus negotiations, he said: "this is not about Australia, there’s nothing in [PACER Plus] for us, we think it’s good for the region. And it is an initiative that we want to extend because it is beneficial to reduce poverty in the region … it doesn’t have any economic significance for us; it’s just good for the region as a whole and that’s why we’re doing it."

If there is to be no economic benefit for Australia from a free trade deal with the Pacific, one wonders why corporations like the ANZ bank, Honda and Qantas have all made submissions on PACER Plus to the Department of Foreign Affairs and Trade — calling for things like lower tariffs and binding rules to protect Australian investors in the Pacific. Or why Philip Morris wants PACER Plus to allow them to export more cigarettes to the Pacific. Or why the Australian Services Roundtable, a peak-body for Australian services companies, has undertaken a review of "limitations and restrictions" affecting trade in services in the Pacific island countries — which is effectively a "wish-list" of laws and regulations that Australian businesses may want to see changed to allow them to do business in the Pacific. Clearly Australian businesses do think there is something in PACER Plus for them.

Pacific island countries are strung out across the largest ocean on earth, and they already face incredible hurdles to developing new industries and generating employment — like small domestic markets, expensive and infrequent inputs and geographic isolation. While competition is sometimes welcomed, open slather from the islands’ "big brother" neighbours may not help Pacific businesses "embrace the global economy", it may instead just wipe many of them out.

Many in the Pacific feel that Australia’s interest in the PACER Plus negotiations is driven by its own trade interests, and not by concern for the poor in the region. In April 2009, Vanuatu Foreign Minister Bakoa Kaltonga met with McMullan and the Australian Trade Minister Simon Crean in Port Vila to talk about PACER Plus. Kaltonga told media that "[Australian Government representatives] are coming to force Pacific island countries into signing the PACER agreement with the view, for example, for Vanuatu, to reducing tariffs on Australian imports".

Then, when Pacific Trade Ministers met to discuss PACER Plus in June 2009, the Cook Islands Trade Minister Wilkie Rasmussen said "Ministers at the trade meeting were concerned about the haste of the push by New Zealand and Australia for PACER Plus negotiations to start and the intrusion of the agreement into the sovereign rights of each Pacific country."

Another problem for McMullan’s argument that PACER Plus is just "good for the region as a whole", is that there is very little evidence that a standard free trade agreement will reduce poverty in the Pacific.

Pacific island countries already have duty-free and quota-free access to Australian markets for most of their exports, and most Pacific countries are already integrated into the global economy, with trade-to-GDP ratios that are well ahead of Australia’s own.

What we do know is that PACER Plus has the potential to increase poverty in the island countries. Forcing deep cuts in tariffs will slash government revenue across the region — further undermining attempts to realise health and education outcomes. Expected increases in Australian imports are also likely to displace local production, leading to job-losses and business closures. 

The Rudd Government knows deep down that PACER Plus will hurt the Pacific. The most recent Parliamentary Secretary for Pacific Island Affairs, Duncan Kerr — who vacated the position in October last year — acknowledged that PACER Plus "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."

The inconvenient truth is that the parts of PACER Plus that will hurt the Pacific are just not necessary — and McMullan, Crean and Kerr all find it hard to acknowledge that these are the very parts that are designed to benefit Australian and New Zealand exporters.

The Solomon Islands Government has pointed out that the linking of a trade agreement to Australia’s aid program will make it very difficult for any island countries to refuse a final PACER Plus agreement. A briefing paper prepared by the Solomon Islands Department of External Trade explained that "Australia has made it clear that they are seeking to push the negotiation of a new free trade agreement forward as quickly as they can. Realistically, it is difficult for Pacific islands — many of whom are highly dependent on aid from Australia — to resist this pressure."

Perhaps it is time for the Australian Government to put aside its template for a standard free trade agreement — to stop pretending that its trade interests are the same as the interests of the poor in the Pacific — and start asking what Pacific island countries want out of a trade agreement.

The Pacific’s lead spokesperson on PACER Plus, Solomon Islands Trade Minister, William Haomae, told trade ministers last year that his "greatest concern is the possibility that we might not be able to involve all the groups that will be affected by a PACER Plus agreement from the very start of the negotiating process. I want every one of my countrymen that will have a stake in this agreement to have a say. And I believe that this must happen before my country’s position is finalised and important decisions are made."

Forget about Julie Bishop. Here’s a real voice speaking on behalf of poor people in our region. Are McMullan and Crean listening?

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.