Reassess free trade agreements

Reassess free trade agreements

By Stanley Simpson

Stanley Simpson is the Coordinator of the Pacific Network on Globalisation (PANG). The views expressed here are his, and not necessarily those of the Network.

Recent experience with the implementation the Melanesian Spearhead Group (MSG) Free Trade Area Agreement effectively illustrates how Pacific leaders sign regional and international agreements without adequate consultation and assessment at national and local level.

It also serves as warning and food for thought to those intending to sign on to the Pacific Island Countries Trade Agreement (PICTA), the Pacific Island Countries Agreement on Closer Economic Relations (PACER), and for the Pacific member countries of the World Trade Organisation participating in negotiations for a new round of trade deals.

Do we really know what we are getting ourselves into? Have we fully assessed the impacts? What we mostly hear of these agreements from officials are the bountiful benefits, very rarely do they express the negative effects or costs. Most often, the negative effects take up a single paragraph or sentence, and are dismissed with the assertion that the Pacific has no choice but to comply.

The problems associated with the MSG free trade agreement can be seen in either positive or negative light. They can at the very least, trigger a much needed reassessment of national and regional development goals by highlighting the inequalities in the free trading system, and the failure of the “one-size fits all” model which is assumed to work everywhere no matter what differences exist. They illustrate that the belief everyone will be able to compete on an equal footing with each other, is absurd, and calls into question the suitability and viability of the “one regional market of six million people” as envisaged by the Forum Secretariat.

For who will win, and who will lose?

The Forum knows very well who will win under PICTA. At a trade union meeting in September, the Forum Secretariat trade policy adviser Professor David Forsyth labeled Fiji the ‘big boy’ in trading within the region, saying they will not suffer any social impact as PICTA would affect only 4 per cent of Fiji’s trade (he did not highlight however that the loss of tariff revenue would likely see the increase of VAT in Fiji, a reality that has come to pass and which has severe social impacts).

But for trade, it should be good for ‘big boy’ Fiji.

But what then of the ‘small boys’? Are they expected to let the ‘big boy’ take over their markets while they struggle to penetrate the Fiji market. Should they just tolerate it, grit their teeth and look for something else to trade in?

The MSG also highlights that little or no research was made on what the negative costs will be and how they should be addressed. Was a socio-economic impact assessment ever done, and if so, by whom? In November, Vanuatu announced that it would re-impose 40 per cent customs tariffs on 6 products under the MSG agreement to protect local manufacturers. Fiji and PNG goods were seen to be flooding the Vanuatu market.

In April this year, the Solomon Islands announced that it would seek temporary suspension of its membership under the MSG as part of the government's plan to revive the country's economy by promoting and protecting the local manufacturing industry. It was explained that the MSG did not help to improve the country's economy because of the imbalance of trade between the members of the group citing SBD$70,000 a year in exports compared to SBD$28 million worth of imports.

In September it was reported that Fiji and Papua New Guinea were discussing ways to end differences threatening PNG’s intended canned beef exports to Fiji, which did not comply with Fiji’s import requirements, although Fiji’s canned meat exports to PNG was increasing. It was proposed that, if the problem could not be sorted out, canned meat should be dropped from the MSG agreement.

Last week, Goodman Fielder International Fiji Limited, distributors of Tuckers ice cream, attacked the MSG trade agreement saying it was not as beneficial as expected. Vanuatu’s re-imposition of tariffs meant Tuckers ice-cream would not be able to effectively compete there.

So where do we go from here? Stubbornly insist that we have no choice under the new world trading system? Or must we reassess the whole process?

There is a potential these trade agreements could set Pacific countries against each other. In a critique of PICTA done in February 2002, the Pacific Network on Globalisation (PANG) predicted: “Far from furthering co-operation among Pacific Island states, PICTA will encourage competition between them and could provoke unanticipated discord and tension among them and their peoples. This could undermine the regional unity that has been a hallmark of successful negotiations around shared resources like fisheries.”

Fiji appears to be the main beneficiary of the MSG and PICTA but when PACER comes into force ushering in free trade with Australia and New Zealand, we may not be so privileged. Forsyth himself admitted that while Fiji was a ‘big boy’ within the region, it was a ‘small boy’ when dealing with Australia and New Zealand. In his own words, PACER may involve “major ‘adjustment’ for Fiji.” Imagine then the scale of ‘adjustment’ for countries like Vanuatu and the Solomons, let alone the smaller countries like Kiribati and Tuvalu.

The writing is on the wall that we must reassess these free trade area agreements. We cannot accept that there are no alternatives in the global economic system. To accept the current orthodoxy of free market fundamentalism without question is not only defeatist, it means ignoring and abandoning responsibility for the economic, social and political consequences.

It would make a mockery of our democracies, and rob us of the opportunity to innovate, think freely and protect ourselves.

The need to trade is appreciated, but we must push for fair trade, rather than one-size for all free trade.

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