Suva-- Fiji's consideration of joining the regional free trade agreement known as PACER-Plus raises critical
questions about what it realistically expects to get out of
it compared to what it will cost. Fiji previously looked at the offer and decided against it. So what has changed?
The previous Fijian government, which was at the table when PACER-Plus was negotiated, rejected the agreement unequivocally upon assessing the texts. This rejection was based largely on PACER-Plus's potential impact on Fiji's economic sovereignty. PACER-Plus would limit how Fiji would determine what
development means and enact policies to do that unencumbered by the impact on Australia and New Zealand exporters.
There were numerous contentious aspects of PACER-Plus for Fiji and these are more prominent now than before. The need to develop a wider economic base is part of Fiji's post-Covid economic plan, but under PACER-Plus, increased competitive imports from Australia and New Zealand coupled with weak protections for infant industries undermine this.
The infant industry protection was a contentious area. Even when finally included, it was so weak that it became a key reason for Fiji's decision not to sign the agreement. Fiji's then Trade Minister Faiyaz Koya stated that they can't allow PACER-Plus “to limit our development aspirations by taking away the
flexibility to support our new and emerging industries."
The protection provisions in PACER-Plus restrict any support to industries that
are classified as “new” or have undergone “substantial expansion." The protections are limited only to suspending import tax cuts if Pacific countries can prove that a certain industry is being harmed by the trade deal, requiring a difficult burden of proof for Fiji. This problematic section of the agreement narrows the scope and incentive for countries to be able to utilize the protections freely to suit their development aspirations. New Zealand has bragged that PACER-Plus' infant industry protections contained “stronger
limitations” than those in similar provisions in the other agreements some
Pacific island countries are party to.
The agreement undermines emerging industries in Pacific island countries, such as the industrial sector in Fiji and Papua New Guinea, which is hardly
the basis for a claimed "development agreement."
This is exacerbated by the inclusion of rules stating that if Fiji is to negotiate
better market access for goods with another country, it has to set the same conditions for Australia and New Zealand. While such clauses, known as "most-favored nation," are common in other parts of free trade deals like trade in services, its unusual inclusion in PACER-Plus was heralded as a “significant
achievement” in Wellington as it will “ensure that New Zealand is treated no less favorably than other significant competitors in the future."
This impacts Fijian industries and undermines Fijhi's negotiating position of Fiji to explore other market opportunities with new partners, especially with
developing countries. The incentive to offer better conditions to a new trading partner will now be tempered by the MFN provision and the implications for domestic industries to withstand greater imports from the main trading partners of Australia and New Zealand.
This is by design and inherently anti-development. New Zealand says that the flexibilities in PACER-Plus, such as the length of time for tariff cuts and the
weak safeguards mentioned above, were only possible because of the MFN clause. This makes a mockery of any claim that this was about the development of the Pacific and instead was purely about ensuring that Australia and New Zealand maintain a commercial advantage in exporting to the Pacific.
Another challenge for Fiji will be government revenue loss from cutting import taxes from Australia and New Zealand. While the schedule of tariff
cuts isn't public, based on the other PACER Plus party commitments, it can
reasonably be expected that Fiji will have to start making additional tariff cuts upon joining. This was the schedule set for many Pacific island countries.
As Fiji slowly reduces its debt levels post-Covid, cutting off revenue sources remains a highly risky approach. At Fiji's full implementation of the interim-Economic Partnership Agreement with the European Union, Trade Minister Kamikamica stated that it would result in the loss of FJD$737,000 a year in government revenue.
Imports from the EU account for approximately 3 percent while imports from Australia and New Zealand account for over 30 percent. While previous estimates have put the expected revenue loss in Fiji at close to USD$80 million per year, prior to any decision there should be a clear outline of the projected revenue loss and how it will be addressed. Further increases to the value-added tax would only exacerbate the cost-of-living issues.
The PACER-Plus agreement does not provide any new opportunities for Fiji and that has not changed since it was previously rejected. Fiji currently enjoys duty-free and quota-free market access into Australia and New Zealand, PACER-Plus will offer no new market access for its products in those markets. The development assistance program is based on existing aid allocations from
Australia and New Zealand, and Fiji is already accessing the labor mobility programs in both countries (while also wrestling with labor shortages at home).
There is a clear set of challenges that Fiji has already identified within PACER-Plus that have not changed since the agreement was concluded. The lack of protections for industries in Fiji raises serious questions about Fiji's ability to adapt to changing economic circumstances and support new and emerging industries from competition.
In 2015, as host of a round of negotiations, then Trade Minister Faiyaz Koya
summed this position up by stating: "Pacific parties are being pushed to give
away their policy space, especially the right to regulate. The chapters on investment and service and general exceptions, for example, seek to constrain our policy space to the extent that we no longer are in control of our development."
Fiji is set to renew its trade policy for 2025 2035, which is taking place in a
quickly changing global economic environment. The proponents of PACER-Plus are selling it as a long-term development agreement but it is ultimately locking Fiji into economic ideas that have done little to support development.
Fiji already has access to Australia and New Zealand markets (although the quarantine issues remain a problem) but PACER-Plus offers them only the
burden of giving access to both countries. Joining PACER-Plus will result in a limiting of opportunities for Fiji, not expanding them.
Adam Wolfenden is the Trade Justice Campaigner for the Pacific Network on Globalization.
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