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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. The Pacific Island Countries Trade Agreement (PICTA) is currently a goods trade agreement amongst 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 had ratified the Agreement.
PACER Plus is a proposed free trade and economic development agreement between New Zealand, Australia and Forum Island Countries and is part of the commitment to a wider process of economic integration and trade liberalisation contained in PACER.
Leaders, at the Pacific Islands Forum Meeting in Cairns in August 2009 agreed to the commencement of negotiations on PACER Plus. An Office of the Chief Trade Adviser (OCTA) has been established to assist Forum Island Countries in their preparations for and participation in PACER Plus negotiations. NewZealand 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.
New Zealand's key objective and vision
The special nature of our relationship and our significant people to people links with the Pacific means that PACERPlus will not be a traditional trade negotiation in which commercial interests alone define New Zealand’s approach. Consistent with the evolving focus of our Official Development Assistance (ODA) efforts in the Pacific, New Zealand’s key objective in pursuing PACER Plus will be to ensure that the agreement promotes sustainable economic growth in the Pacific, enabling Pacific Island countries to capitalise on their potential for trade. New Zealand’s vision for PACER Plus is an agreement that will equip Pacific Island countries better to withstand external shocks, to raise standards of living, to increase jobs and export capacity in the region and to address the significant goods trade imbalance that currently exists between the Pacific and New Zealand.
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 Forum Island Countries may negotiate free trade agreements.
Possible areas of negotiation
A wide range of trade related issues has been signalled for possible inclusion.
The goods trade imbalance between New Zealand and the Pacific shows that providing market access on its own is not sufficient to ensure that the benefits of trade are able to be realised. A key focus for New Zealand will, therefore, be capacity building and economic cooperation. Possible areas of negotiation may include the following areas:
|Trade in Goods:||Market Access|
|Rules of Origin|
|Sanitary and Phytosanitary Measures|
|Technical Barriers to Trade|
|Trade in Services:||Market Access|
|Movement of Natural Persons|
|Other Trade Rules:||Intellectual Property|
|Trade and Labour|
|Trade and Environment|
|Cooperation and Assistance:||Economic Cooperation and Development
Development Assistance and Capacity Building
Call for Public Submissions on PACER Plus
The Ministry of Foreign Affairs is calling for public submissions to help shape NewZealand’s negotiating mandate for the PACER Plus talks. While the first call for public submissions has now closed, further public submissions are welcome at any time. See below for further information on making a submission on PACER Plus negotiations.
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.
Read the text of PICTA: Pacific Island Countries Trade Agreement [PDF 1.2MB] [external link]
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.
Regional Trade Adviser
Ministry of Foreign Affairs and Trade
Tel: 04 439 8133
Regional Trade Policy Officer
Ministry of Foreign Affairs and Trade
Tel: 04 439 8364