Caution sounded on new trade deal
The Pacific Agreement on Closer Economic Relations Plus came into effect on Friday, lowering barriers between Samoa’s economy and Australia and New Zealand’s.
But critics warn it could now expose Samoa’s economy to an uneven economic playing field dominated by the region’s richest countries. .
The free trade deal, better known as P.A.C.E.R. Plus, took effect, it was announced on Friday, after the Cook Islands became the eighth signatory to formally ratify the trade deal.
Samoa ratified the agreement last year after two decades of often fraught negotiation.
P.A.C.E.R. Plus has been an often contentious policy with critics suggesting that signing up for the deal would expose the economies of smaller nations such as Samoa, without offering commensurate benefits.
Australia, New Zealand and nine Pacific Island countries, including Samoa signed the agreement in 2018. Under its terms it comes into force two months after the eighth of the eleven signatories ratify the agreement.
Economist and President of the Tautua Samoa Party Luagalau Dr. Afualo Wood Salele, says the trade deal is not a win-win for Samoa despite the promise of extra access to the large economic markets in the region, Australia and New Zealand.
Luagalau says that Samoa cannot compete against the “stronger and bigger” nations of Australia and New Zealand when it comes to exporting goods and services from Samoa to their countries.
Fiji and Papua New Guinea have refused to sign the agreement and the Pacific Network on Globalisation has called the agreement "unbalanced" as key provisions to benefit Pacific economies on aid and labour mobility are non-binding, while exporters from large economies will gain guaranteed market access.
Under the agreement, some Australian exports will have tariffs reduced or removed including dairy products, medicaments, gold coin and offal to Samoa.
Similarly, Australia's 5 per cent tariff on soaps, skincare creams and lotions made from coconut oil in Pacific island countries will be eliminated.
“There are concerns from those countries [Fiji and Papua New Guinea] about P.A.C.E.R. Plus, especially in regard to the role of Australia and New Zealand,” Luagalau said.
“The truth is: there is no way we can compete with New Zealand and Australia as far as exports. Remember, when we export our goods [to Australia and New Zealand], in the end we cannot compete with the quality.”
There are a number of issues in the area of trade that could be included in P.A.C.E.R. Plus, Luagalau noted, including migration and labour, specifically for Samoa’s seasonal workers.
“They should extend [labour market access] under P.A.C.E.R. Plus. There should be more room to allow other skilled labourers, not just fruit pickers. They should open up opportunities for other jobs. This needs to be properly addressed so we aren’t just sending fruit pickers,” said Luagalau.
“The seasonal workers could also go in and work in other services.”
He said there are skills and training opportunities offered in Samoa like the Australian Pacific Trading Coalition (A.P.T.C.).
“The A.P.T.C. offers some high qualifications recognised in New Zealand and Australia. It could also be extended nurses and other professions and hotels. That would be nice but it’s just fruit picking,” said Luagalau.
When a term is up for seasonal workers, they have to return under the current agreement but it needs to be further extended.
Lugalu argues P.A.C.E.R. Plus must also pay close attention to Samoa’s agricultural exports and the imports from New Zealand and Australia.
“We need to be very careful when it comes to trade...the stronger and bigger countries can become a monopoly, a monopoly in a sense that they are the only trading partners with whom we are working...and then all the goods that will be exported will be from them,” said Luagalau.
“They will dictate the price for us, especially the importers. It’s difficult to compete with them and the imports they bring into Samoa.
“But on the other hand we can use the trade agreement to raise these issues and ask that they drop the price for the goods they are selling to us. Otherwise, if they sell it to us at a high price, that means we will have to levy a tax and raise the price to recover the revenue.”
He said the agreement should not just cover physical goods but services as well.
“For example, there is tourism, hospitality, education, health so those sectors must be accommodated by the agreement so there is a win-win situation for us and the other Pacific countries. There is no point that is almost a one-way flow,” Luagalau said.
“From what I see when looking at this, we need to use this trade agreement to lower the costs of the goods and services that we are importing to Samoa. If we leave those entirely to the forces of supply and demand, you’ll find that the expenses and the costs will be higher and the consumers will have to pay more.”
The University of Sydney’s Dr. Patricia Ranald previously “noted the absence of any independent study of PACER Plus economic impacts” and its impact on island nations’ economies.
She said previous research by the Australian Parliament has “acknowledged potential negative impacts on small and vulnerable Pacific Island economies”.
But Australia and New Zealand both welcomed the agreement’s passage on Friday.
Australian Member of Parliament Alex Hawke, in a statement on Friday, said trade and prosperity in the Pacific will thrive following the deal coming into effect.
“P.A.C.E.R. Plus will deliver new and enhanced trade opportunities for Australia and our Pacific partners, with benefits to flow in farming, fisheries business and increased investment in the region,” said Mr. Hawke.
“Through P.A.C.E.R. Plus we will work together in the interests of trade, investment and the prosperity of the Pacific.
“This historic agreement represents further evidence of the increasing depth of Australia's relationship with its Pacific family. The agreement will also support Pacific Island partners as they work to recover from the economic impact of COVID-19.”
Australia will provide AUD$19 million to support its Pacific partners as they work to implement PACER Plus, to ensure they can fully embrace the export benefits available to local businesses, he said.
“Australia looks forward to working with regional partners to take full advantage of the opportunities offered by PACER Plus in the interest of our region,” he said.
The Agreement will enter into force on 13 December.
A request for comment from the Government Press Secretariat was not immediately answered on Friday evening.