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Substantial economic problems and growing unemployment in all Pacific countries are adding to the political and security challenges of the region. In an effort to help create favourable conditions for private sector led growth throughout the region and stimulate economic development, attempts are being made to pursue a process of gradual trade and economic integration. The Pacific Agreement on Closer Economic Relations (PACER) provides a framework for pursuit of this goal, clearly stating this objective as
“the gradual trade and economic integration of the economies of the Forum members in a way that is fully supportive of sustainable development of the Forum Island Countries and to contribute to their gradual and progressive integration into the international economy” (Article 2.1)
To achieve this objective, the PACER provides a framework for cooperation leading over time to the development of a single regional market. This is intended to be achieved through fostering increased economic opportunities and competitiveness through more effective regional trade arrangements.
Specifically, the PACER envisages the establishment of Free Trade Agreements within the region. PICTA, the Pacific Island Countries Trade Agreement, PICTA is currently a goods trade agreement Amoungst the 14 Forum Island Countries although negotiations are underway to extend it to services. While it was signed in 2001, at the same time as the PACER, it did not come into force until 2003 once sufficient Forum Island Countries (FICs) had ratified the Agreement.
PACER Plus is a proposed free trade and economic development agreement between New Zealand, Australia and Forum Island Countries. PACER Plus will extend and operationalise the commitment to regional economic intergration and trade liberalisation contained in the Pacific Agreemant on Closer Economic Relations (PACER).
Leaders, at the Pacific Islands Forum Meeting in Cairns in August 2009 have agreed to the commencement of negotiations on PACER Plus. An Office of the Chief Trade Adviser (OCTA) is being established to assist Forum Island Countries in their preparations for and participation in PACER Plus negotiations. New Zealand and Australia have each agreed to provide AUD$500,000 per annum for an initial three year period to fund the OCTA. Further funding building on the contribution of New Zealand and Australia may be sought from other donors.
Forum Trade Ministers will meet to discuss a framework for PACER Plus negotiations. The meeting will be held in Brisbane on 23 - 24 October 2009.
The forthcoming discussions are likely to be preliminary in nature but will cover timelines, identification of issues and issues that the Chief Trade Adviser can negotiate on. A deadline for the conclusion of negotiations has not been set, negotiations are expected to take several years, although Trade Ministers at their meeting in June in Apia agreed to discuss possible timelines of 2 – 5 years.
Once a framework for PACER Plus negotiations is developed, it is expected that discussions will focus on the substantive provisions of the agreement (i.e. the articles of the agreement). Discussions on market access schedules (e.g. goods and services), are likely to take place at the latter stages of PACER Plus negotiations.
New Zealand’s special relationship and significant people to people links with the Pacific means that PACER Plus will not be a traditional free trade negotiation in which commercial interests alone define our negotiating positions.
New Zealand’s objective in pursuing PACER Plus will be to ensure that the agreement promotes sustainable economic growth in the Pacific, enabling Forum Island Countries (FICs) to capitalise on potential for trade. Accordingly key themes that New Zealand will look to promote in negotiations include sustainable economic growth, capacity building and economic cooperation. It will also be important for New Zealand that the agreement is flexible and takes account of individual countries’ circumstances, sizes and stages of development.
We will, however, wish to ensure New Zealand’s trade interests in the Pacific are not disadvantaged relative to those of other partners with whom the FICs may negotiate free trade agreements.
The Ministry of Foreign Affairs is calling for public submissions to help shape New Zealand’s negotiating mandate for the trade talks. The public consultation process is an ongoing one that will provide further opportunities for input and comment on the talks. See below for further information on making a submission on PACER Plus negotiations.
To view the text of PACER see below:
The Pacific Island Countries Trade Agreement (PICTA), a free trade agreement amongst Forum Island Countries (FICs), came into force in 2003. The objective of PICTA is to promote regional integration and trade development in the island states through creation of a single regional market, as a precursor to their progressive involvement in the wider regional and world economy. The agreement encourages economic and social development and improved living standards by progressively phasing out tariffs among FICs. Implementation of the Agreement was delayed and only became operational from 2007, when a number of island states indicated their readiness to commence preferential trade. As a result of the delays, the schedule for elimination of tariffs on intra-regional trade now extends out to 2021.
The liberalisation of trade amongst FICs under PICTA can be seen as a stepping stone and a necessary precursor to trade liberalisation between FICs and New Zealand and Australia through PACER Plus. Reduction of trade barriers between the FICs should encourage reform of their economies and growth in trade around the region, strengthening them and making them ready for broader liberalisation. While this will result in a disadvantage to New Zealand exporters who do not enjoy preferential access to Pacific Island markets under PICTA, the disadvantage is likely to be temporary, until the advent of free trade under PACER Plus. In the meantime, like exporters from other regions such as Europe or Asia, New Zealand exporters will continue to face Most Favoured Nation (MFN) tariffs in the island countries.
View the text of PICTA below:
The South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA) governs trade in goods between Forum Island Countries (FICs) and Australia and New Zealand. New Zealand provides duty free and unrestricted access to almost all products originating in Pacific Island Countries under SPARTECA. This agreement, dating from 1980, was designed to provide more certain market access for Pacific Island countries and to stimulate trade, investment and economic growth. It is now of diminishing relevance, however, because of New Zealand’s declining external tariffs.
Under SPARTECA, products originating in FICs benefit from duty free, quota free entry into New Zealand and Australia. To qualify under the Rules of Origin (ROO), manufactured goods must meet a minimum 50% local content requirement (based on ex-factory cost).
Forum Island countries have pressed for improvements to the rules of origin applied under SPARTECA. Given the complex and time consuming process required to establish new Rules of Origin, New Zealand has suggested that the issue be taken up in the context of discussions on PACER plus, the reciprocal free trade agreement envisaged between New Zealand, Australia and the FICs.
View the text of SPARTECA below:
The Pacific Island Trade and Investment Commission (PITIC NZ) provides support for the trade, tourism, investment and labour promotion efforts of Pacific Island countries within the New Zealand market. New Zealand fully funds this branch of the Pacific Islands Forum Secretariat to the tune of close to $1 million per year. A dedicated Pacific position in Biosecurity New Zealand within the New Zealand Ministry of Agriculture and Forestry, facilitates the consideration of Pacific Island applications for the establishment of quarantine pathways to allow the export of fresh produce to New Zealand. Aid funding has been drawn on at times to temporarily fund the position and to advance risk analysis of Pacific Islands produce.
Contact:
Joanna Kempkers
Regional Trade Adviser
Pacific Division
Ministry of Foreign Affairs and Trade
Tel 04 439 8248
Matthew Aileone
Regional Trade Policy Officer
Pacific Division
Ministry of Foreign Affairs and Trade
Tel 04 439 8782
