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It is proposed that New Zealand ratify the Pacific Agreement on Closer Economic Relations (PACER). The Agreement will come into force once seven members of the Pacific Islands Forum have either ratified, or acceded to, the Agreement.
At the 1999 South Pacific Forum, Leaders endorsed in principle the negotiation of a regional trade agreement. New Zealand has participated actively in these negotiations.
PACER lays the groundwork for future trade and economic co-operation among all members of the Pacific Islands Forum, including New Zealand and Australia. It establishes the long term goal of a ‘single regional market’ among Forum members, to be achieved in stages. Initially the Forum Island Countries are to conclude a free trade agreement in goods amongst themselves, subsidiary to PACER, known as the Pacific Island Countries Trade Agreement (PICTA). Negotiations towards free trade agreements between Forum Island Countries and New Zealand and Australia would take place later, but in any event would begin not more than eight years after PICTA has entered into force.
PACER safeguards the interests of New Zealand, and Australia in Forum Island Country markets by providing opportunities for consultation and negotiation should Forum Island Countries embark on FTA negotiations with non-Forum trading partners. It commits New Zealand and Australia to providing financial and technical assistance to Forum Island Countries in support of the Agreement’s goals.
The South Pacific Regional Trade and Economic Agreement (SPARTECA), under which New Zealand, and Australia, have provided non-reciprocal duty free access for Forum Island Country exports to their markets since 1981, is not affected by the new Agreement and all its provisions will remain in force. Once a Forum-wide free trade agreement is negotiated, as envisaged by PACER, however, SPARTECA would be subsumed by this Agreement.
There are a number of reasons for New Zealand to become a party to PACER:
PACER is intended to set a framework for current and future trade and economic cooperation amongst all Forum members. It enables Forum Island Countries to undertake a 'stepping stone' approach to trade liberalisation by liberalising among themselves first. It provides for technical and economic assistance to assist the development of Pacific Islands economies. There is strong support on the part of Forum Island governments to promote the process of trade and economic integration in the region. PACER, and its subsidiary agreement PICTA, are seen as a unique opportunity to further their economic development, and to assist them in addressing structural adjustment issues in their own economies. It is to New Zealand’s advantage that its Pacific Island neighbours are able to develop their economies and provide employment opportunities for their people. We are mindful of the need to work collaboratively with, and assist, Forum Island Countries to enable them to be equal partners in the Agreement. New Zealand’s involvement, while aimed at promoting our trading interests, is informed by the growing Pacific population in NZ and the importance of fostering an economically prosperous region.
Our trade with the Forum Island region is significant. New Zealand (non-oil) imports from Forum Island Countries were worth NZ$102 million, and exports NZ$457 million in the year to December 2000.
PACER will enhance New Zealand’s trade and economic relationship with our immediate region, and provides a mechanism for on-going Ministerial attention to fostering the economic and broader relationship with Forum Island Countries (through the annual review mechanism and the three-yearly general review provision in Article 16). Without such a mechanism there is a risk New Zealand’s trade and economic relationship with the Pacific region may stagnate. The Agreement secures our inclusion at the regional negotiating table. If New Zealand failed to ratify the Agreement, we would miss an historic opportunity to participate in greater integration in the Pacific region, and be left behind in this wider regional initiative.
PACER offers New Zealand the opportunity (under Article 5) to take part in negotiations on free trade arrangements with Forum Island Countries eight years after the Pacific Island Countries Trade Agreement has entered into force (unless earlier agreed under the general review provisions). If these negotiations result, as intended, in improved trading arrangements in the Pacific region, this will provide for more secure and open access for New Zealand exports of goods to Forum Island markets. Failure to ratify the Agreement would mean loss of the opportunity to take part in these negotiations. New Zealand exports would continue to face import barriers in Forum Island markets, and would also very likely lose market share.
Article 6 provides a mechanism for consultation and negotiation of a free trade arrangement with New Zealand, and Australia, if Forum Island Countries negotiate a free trade arrangement with non-Forum countries wealthier than New Zealand. We wish to ensure that our trading arrangements with Forum Island Countries remain at least as favourable as any agreement which Forum Island Countries might negotiate with other trading partners. For example, under the Cotonou Agreement between the European Union and African, Caribbean and Pacific countries, the European Union will commence negotiations with these ACP countries at the end of 2002 for reciprocal free trade agreements. If New Zealand failed to ratify the Agreement, we could have no expectation of equivalent treatment.
The Agreement provides for trade facilitation measures - ie streamlining of customs procedures, quarantine regulations and standards and conformance - to make trading with Forum Island Countries easier, and to assist their economic development. The Agreement is thus consistent with the Government’s policy to advance trade liberalisation within a framework that provides for direct reciprocal benefits. Our trading interests in these areas would be adversely affected if New Zealand did not ratify the Agreement. It will not however affect our ability to maintain in place a robust biosecurity regime.
By reducing barriers to bilateral trade, and reducing compliance costs for business, PACER would encourage and facilitate economic interaction and entrepreneurship between Forum Island communities in New Zealand and the Forum Island Countries. This opportunity to assist Pacific peoples in New Zealand would be lost if New Zealand did not ratify the Agreement.
New Zealand would be accepting an obligation to enter into negotiations with a view to establishing reciprocal free trade arrangements with Forum Island Countries eight years after the Pacific Island Countries Trade Agreement has entered into force (Article 5). Goods from Forum Island Countries already have free access to New Zealand’s market. Such free trade arrangements stand to benefit New Zealand through greater access to Forum Island Countries’ markets.
New Zealand would be accepting an obligation, in the event we commence formal negotiations for free trade arrangements with any non-Forum country, to undertake consultations with each Forum Island Country with a view to the commencement of negotiations for improved market access (Article 6). This obligation would arise if we began FTA negotiations with a third country.
PACER (in Article 8) encourages (but does not require) Parties to undertake voluntary unilateral reductions in their tariffs applied to each others’ exports. This last provision is important for New Zealand exporters facing often high tariffs in some Forum Island Country markets. New Zealand already grants duty free access to goods of Forum Island Country origin.
New Zealand will be accepting an obligation to work with Forum Island Countries (and Australia) to establish trade facilitation programmes (Article 9 and Annex 1). Trade facilitation covers a range of activities intended to allow trade to take place more easily, such as cooperation on technical and regulatory standards and customs and quarantine matters. This work might entail staff time and funding from the Ministry of Agriculture and Forestry, the Ministry of Economic Development, Customs and the Ministry of Foreign Affairs and Trade, as part of the normal duties of these departments. This work can be met from within existing baselines.
New Zealand would be accepting an obligation to apply World Trade Organisation rules with respect to imports from non-WTO countries Party to the Agreement (Article 10). For example, the quarantine measures New Zealand imposes on imports from Vanuatu (not yet a WTO member) would have to be based on sound science, and not be arbitrary or unduly cumbersome. In practice, we already apply World Trade Organisation rules with respect to imports from all non-WTO countries.
Article 11 notes the need for financial and technical assistance for Forum Island Countries so that the Agreement’s objectives can be met. This assistance relates to the trade facilitation measures in Article 9, and also to areas such as trade promotion, capacity building and structural adjustment. This article directs Parties to establish a work programme for financial and technical assistance, support for which is intended to come from Australia, New Zealand and other donors. New Zealand would thus be accepting an obligation to provide, with Australia and other interested donors, “an adequate level of funding to promote the timely implementation of the objectives of the Agreement, including trade facilitation programmes...”
Article 12 obliges Parties to assist each other in international trade and economic fora, in particular in the World Trade Organisation, and obliges New Zealand, and Australia, to assist Forum Island Countries in their efforts to become active members of such organisations. New Zealand has sought to assist Forum Island Countries in this way already, and will continue to do so.
The Agreement requires the Parties to meet at least once per year to review the implementation and operation of the Agreement, with a general review after three years, and thereafter at three-yearly intervals, or as otherwise agreed to by the Parties.
The Agreement contains certain notification and consultation provisions.
There is no obligation to notify the Agreement to the World Trade Organisation under GATT Article XXIV, because PACER is not a free trade agreement within the meaning of that Article.
PACER is a framework agreement, intended to lay the foundations for expanded trade, higher living standards and new employment opportunities in the Forum Islands region, and is not a free trade arrangement per se. Its effects are correspondingly limited. Nevertheless some provisions (eg the trade facilitation provisions in Article 9 and Annex 1) will bear fruit in terms of New Zealand’s economic and trade interests in Forum Island Countries in the short and medium term.
Socially and culturally, the Agreement is expected to encourage and facilitate interaction and entrepreneurship between New Zealand (including Pacific Island communities in New Zealand) and the Forum Island Countries.
Core labour and environment standards are not specifically mentioned in the Agreement. There would be scope to address these at a later stage in negotiation of a Forum-wide free trade arrangement. The Preamble to the Agreement makes clear, however, that it is intended to contribute to sustainable development and the elimination of poverty, and development of the Pacific region.
As noted above, New Zealand would incur obligations to establish trade facilitation programmes (under Article 9 and Annex 1) and contribute financial and technical assistance (under Article 11) in support of the objectives of the Agreement. New Zealand has allocated an initial contribution of NZ$250,000 towards financial and technical assistance, to go largely towards trade facilitation work as the first priority area under the Agreement. Future funding assistance will depend on the quality of the projects proposed as part of the work programme envisaged under Article 11. The costs of this Agreement, including in the above areas can be met from existing base lines. No new funds will be required to meet New Zealand’s obligations under the Agreement.
No protocols are envisaged at this point. PACER is intended, to function as an “umbrella agreement” and is thus intended to encompass subsidiary agreements. These subsidiary agreements (including the PICTA) are dealt with under Part Two of the Agreement. The Agreement envisages negotiations on a Forum-wide free trade arrangement not later than eight years after the PICTA has entered into force. These negotiations are intended to lead to further subsidiary agreements.
There are no legislative requirements arising out of New Zealand’s ratification of the Agreement. The implementation stages of the Agreement will include, however, participation in the development of the trade facilitation work programmes envisaged. This activity may form part of the future work programmes of the Ministry of Agriculture and Forestry, the Ministry of Economic Development, Customs and the Ministry of Foreign Affairs and Trade, as appropriate.
Officials have conducted domestic consultations and provided background briefings to business groups, including the Fiji / New Zealand Business Council and the Papua New Guinea / New Zealand Business Council, and others on the negotiations with Pacific Forum countries. While noting that PACER is not a free trade agreement in itself, they have welcomed the fact that the Agreement will ensure that New Zealand’s trade and economic interests in Forum Island markets will be able to be protected, should any of the Forum Island Countries negotiate free trade arrangements with non-Forum members.
Te Puni Kokiri and the Ministry of Pacific Island Affairs were among departments consulted in the course of the negotiations on PACER.
Any party wishing to withdraw from the Agreement can do so on giving 180 days written notice to the Secretary General of the Pacific Islands Forum Secretariat.
