Regional Integration in the Pacific .A W W W

Chapter 6 m o .c te a g h s Regional Integration in the Pacific .a w w w

m o Tiru K. Jayaraman c . te a g h s .a w w w

m o .c te a g h Despite efforts spanning over more than four decades unders the banner of the .a w 1 intergovernmental organization, Pacific Island Forum (the w Forum), since 1971, w

m regional integration has remained an elusive goal for the 14o independent Pacific .c 2 te island countries (PICs). Progress has been slow, with successesa in some areas g h s and setbacks in some others. The emergence of the Eurozone.a with one common w w w currency in 1999 in the European Union inspired the PICs to renew their resolve m o by making fresh initiatives, which culminated in the.c adoption of a Pacific Plan in te a g the Forum Leaders meeting in Papua New Guineah (PNG) in 2005. One of the four s .a pillars of the Pacific Plan is regional integration.w w w

Efforts in terms of regional trade agreementsm (RTAs), including a PIC Trade o .c Agreement (PICTA) for promoting freer tradete amongst PICs in the first instance by a g h 2011 as a stepping stone, and Pacific Agreements on Closer Economic Cooperation .a w (PACER), both signed in 2001, betweenw PICs and the two advanced countries w

m Australia and New Zealand (ANZ), aimingo at the creation of a free trade area .c te a (FTA) by 2015, came to be overlappedg with a simultaneous move toward freer h s trade with PICs by the European Union.a (EU). The latter sought to replace the then w w w expiring Cotonou Agreement with an Economic Partnership Agreement (EPA) m o with PICs on a regional basis by.c holding talks with the Forum, rather than on an te a 3 g individual country basis. Theh apparent rivalry between EU and the region’s two s .a w w w

m o .c te a 1 In 1971, the Forumg was established by seven founding nations, namely Australia, h s Cook Islands, Fiji, Nauru,.a New Zealand, Tonga and Western Samoa – now Samoa under the w w original name, South Pacificw Bureau of Economic Cooperation (see below).

m 2 The Forum compriseso 14 Pacific island countries: Cook Islands, Fiji, Kiribati, .c te a Republic of Marshallg Islands, Federated States of Micronesia, Nauru, Niue, Papua New h s Guinea, Samoa, Solomon.a Islands, Tonga, Tuvalu, Vanuatu and the region’s two developed w w countries, namelyw Australia and New Zealand (ANZ). All of the 16 members are referred

m o to as Forum countries..c New Caledonia and French Polynesia, previously Forum Observers, te a were grantedg Associate Membership in 2006. Current Forum Observers include Tokelau h s (2005), Wallis.a and Futuna (2006), the Commonwealth (2006) and the Asia Development w w w Bank (2006), with Timor Leste as Special Observer (2002). m o 3. c The EU has been negotiating with 76 nations across Africa, the Caribbean and the te a Pacificg (the ACP) all at once. Despite a deadline to complete negotiations before the end of h s 2007,.a most ACP nations resisted signing any kind of deal with the EU, while others have w w signedw an interim-EPA because if they did not, Europe would have raised tariffs on their © Copyrighted Material 104 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material metropolitan powers, who were keen to be the first to get preferential access to PIC m o markets, was affecting the progress of the negotiations. .c te a g h The military take-over of an elected government in Fiji in December s 2006 .a w began to have a profound adverse effect on the progress of the regional integrationw w process during the next six years. The military coup elicited a strong reactionm from o .c te ANZ in terms of economic sanctions against Fiji, followed by Fiji’s asuspension g h s by the Forum in May 2009 and by the Commonwealth in September.a 2009. All of w w them soured the relationships between Fiji and ANZ. w

m o The atmosphere continues to be unfavourable for any fruitful.c negotiations. te 4 a With the continued isolation of Fiji, the Forum negotiationsg on EPA, PACER h s .a and PICTA have all been stalled. However, adversity brings forthw new initiatives. w w In the Pacific context, it is the increasing recognition of the need for sub-regional m o .c cooperation amongst Melanesian Spearhead Group (MSG)te Countries, namely a g h Fiji, PNG, Solomon Islands (SI) and Vanuatu, which comprises 90 percent of the .a w total population of about 8 million of 14 PICs. Similarw to these developments, w

m the Polynesian island countries (Cook Islands, Niue,o Samoa, Tonga and Tuvalu), .c te which are smaller in size and population and naturala resources, have also been g h s5 exploring avenues for sub-regional integration..a The remaining PICs, namely w w w Kiribati, Marshall Islands, Federated States of Micronesia (FSM), Nauru and m o Palau, are categorized as Micronesia. .c te a g The PICs are at a crossroads again. Hurth by isolation for the past three years, s .a Fiji has been drumming up support sincew 2009 by organizing rival meetings with w w other sympathetic PIC leaders under them banners of Engaging with the Pacific o .c (EWP) and Pacific Small Islandste Developing States (PSIDS) in August each a g 6 h year, during which month the Forums usually holds its traditional annual Forum .a w w Leaders meetings. Further, Fiji hasw been looking North, West and East (China,

m North Korea, Indonesia, the Unitedo Arab Emirates, Russia and Cuba) and has .c te a been cultivating new trade andg investment relationships (Okeefe 2012). Already, h s .a w w w exports to the EU. Fiji and PNGm initialled interim-EPAs in late 2007 to avoid tariff hikes o .c on tuna and sugar exports. te a grd h 4 The week-long 43s Forum Leaders Meeting in Cook Islands held in August 2012 .a w decided to maintain Fiji’sw suspension from the group until 2015, by which time a new w democratically electedm government would be in place. o .c rd 5 The Polynesiante Leaders Group (PLG) who met in Cook Islands during the 43 a g h Forum Leaders Meetings held in August 2012 were reported to be considering adding three .a w more members,w Hawaii (50th state of USA), Rapa Nui and Aotearoa Māori, into its fold w

m of eight memberso (Samoa, Tonga, Tuvalu, Cook Islands, Niue, American Samoa, French .c te Polynesia anda Tokelau). Prime Ministers of Cook Islands and Samoa explained to media at g h the conclusions of their closed PLG meeting that the group was not established to counter .a w the influencew of the MSG but to unite leaders of a geographical cluster of countries facing w

m similaro challenges and limitations. .c te a6 The Third Engaging with the Pacific Meeting, held in Nadi, Fiji in the week of g h rd Augusts 20, 2012 just a week before the 43 Annual Summit of Forum Leaders on August .a w w w27-31, was also attended by representatives from Morocco, Kazakhstan and Kosovo. © Copyrighted Material Regional Integration in the Pacific 105 © Copyrighted Material

7 China has become a leading donor in the region, much to the discomfort of them o .c te traditional donors including ANZ and the United States of America (USA). a g h s This chapter seeks to take a closer look at past developments, some of awhich . w w have been seriously hurting regionalism, with new emphasis on the directionsw in

m which the major member countries in the Forum should now move to geto back on .c te a track towards the original goal of integration. This chapter is organizedg along the h s .a following lines. The next section gives a brief background of the Pacificw region. w w The third section reviews the efforts towards regional integration. The fourth m o .c section deals with the tasks ahead. The final section is a summaryte and presents a g h some conclusions with policy recommendations. s .a w w w

m o .c te Background a g h s .a w 8 w w There are 22 Pacific island entities in all, whose political status ranges from m o that of an independent sovereign state to that . ofc a UN Trust Territory, or te a g colonial possessions of the superpowers includingh Britain and France, which are s .a administered as overseas territories. Only 14 independentw states out of 22 entities w w are members of the Forum. m o .c te a g h Hugely Diverse s .a w w w

m The 14 PICs are spread over the Pacifico Ocean about 10,000 kilometres (km) .c te a from east to west and 5,000 km fromg north to south, with a combined exclusive h s economic zone (EEZ) of ocean area.a of about 20 million sq. km. The total land area w w w is just over 500,000 sq. km, of which PNG accounts for 88 percent. Population of m o the PICs is, as of 2011, almost .8c million, of which over 6 million are in PNG. At te a g the other end of the scale is Niue,h with a population of less than 2000. Table 6.1 s .a w presents the selected key indicatorsw of PICs. w

The 14 PICs display a mhigh degree of diversity in natural and human resources. o .c te The Melanesian countriesa have been endowed with a relatively larger land area g h s .a w w 7 China’s aid andw soft loans to PICs during 2007-2011 have been reported to be

m around US$ 600 milliono as against the US aid of US$ 20 million per annum during the .c te a corresponding period.g Samoa’s Prime Minister has expressed his appreciation of China’s h s rd generous assistance.a to Samoa on a number of occasions, the latest being the 43 Meeting w w of the Forum leadersw in Cook Islands in August 2012. He praised the ‘unique flexibility’ of

m o China in its assistance.c to develop the Pacific island state, apparently with reference to rigid te a positions takeng by ANZ with reference to labour mobility and OCTA and the like (Samoa h s Observer. a2012). Professor Bryce Edwards of Otago University told TV NZ: ‘We are having w w w a bit of power struggle here because these Pacific Islands do need resources and money m o quickly.c and it gives them some independence from ANZ.’ (Fiji Times, 2012). te a g8 Populations in each of the 22 Pacific island entities, who are members of the Pacific h s Community,.a range from less than a hundred in Pitcairn Island, the last British outpost, to w w 7w million in PNG. © Copyrighted Material 106 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material with greater arable land for agricultural activities and mineral resources. On m o the other hand, Kiribati and Tuvalu are atoll islands with limited agricultural.c te a g h activities. Since they have larger exclusive economic zones than other PICs,s a .a w major part of their gross national incomes is largely derived from exportsw of fish w and license fees by granting fishing licenses to companies to exploit theirm marine o .c te resources. They also depend upon annual remittances from their seafaringa labour g h s employed in foreign ships. In the case of Polynesian countries, land.a area being w w small, agriculture is confined only to a few staples such as root cropsw and a few

m o exports, such as banana and coconut products. .c te a g h s .a w w w Table 6.1 Selected Key Indicators m o .c te a g h Population Per Capita HD Aid pers Aid as Average .a (‘000) GDP Index capitaw US$ % of Growth w w (Current Rank GDP Rate (%) m o Prices) in .c te a US$ g h s .a w 2009 2009 2010 w 2009 2009 2004-09 w

m Cook 23 7,549 NRo 491 28.0 2.3 .c te Islands a g h s Fiji 834 3,326 86.0.a 84 2.5 0.7 w w w Fed. 108 2,476 103.0 1,093 42.0 -0.8 m o States of .c te a g Micronesia h s .a w Kiribati 99 1,306w NR 277 15.6 -0.3 w

m Nauru 10 3,500o NR NA NA NA .c te a Niue 2 g NA NR NA NA NA h s .a w Palau 20 w 8,074 NR 1,733 27.9 NA w

m Papua New 6,348 o 1,172 137.0 61 5.3 4.6 .c te Guinea a g h s Republic 54 .a 2,504 NR 963 32.1 1.4 w w of Marshall w

m Islands o .c te a g Samoa h 183 2,776 NR 433 16.1 2.1 s .a w Solomon w 539 1,256 123.0 394 42.9 5.5 w

Islands m o .c te Tonga a 103 2,991 86.0 380 12.4 0.2 g h s .a Tuvalu w 11 3,318 NR 254 45.0 2.2 w w

Vanuatum 239 2,072 NR 431 16.5 5.6 o .c te a Noteg s: NA= Not Available; NR= Not Ranked h s Source.a s: World Bank (2011), ADB (2010), Commonwealth Secretariat (2010), UNDP w w w(2010) © Copyrighted Material Regional Integration in the Pacific 107 © Copyrighted Material

Manufacturing Capacity m o .c te a g h s Except Fiji and PNG, none of the 14 PICs have any significant manufacturinga . w w capacity worth mentioning. The manufactured products in Fiji and PNGw include

m sugar and other processed foods, such as biscuits, cooking oil, cigarettes,o beer and .c te a rum and a host of minor processed goods for domestic consumption,g as well as h s .a export to other island countries. Other PICs’ manufacturing activitiesw are confined w w to coconut-based products, such as coconut oil, cream, soaps and detergents. m o .c Almost all PICs, with their attractive beaches and tropical climate,te are unique a g h tourist destinations. However, only a few among them haves been able to take .a w advantage of these endowments for boosting the national income,w such as Fiji and w

m Vanuatu with their head start in physical infrastructure in termso of hotels and resort .c te facilities. Due to the great diversity in endowments, skillsa and human resources, g h s gross national income per capita varies widely among .aPICs. Palau and the Cook w w w Islands belong to a group of upper middle income countries (UMIC), whereas Fiji, m o Samoa and Tonga belong to a group of lower middle.c income countries (LMIC). te a 9 g The group of low income countries includes PNG,h Kiribati, SI and Tuvalu. s .a w w w

m o .c Constraints to Growth te a g h s .a w Constraints to growth and developmentw of PICs stem from their geographical w

m characteristics. One of the former Forumo Secretary-Generals (Urwin 2004) .c te a succinctly categorized the constraintsg as below: (i) remoteness and insularity; h s (ii) susceptibility to natural disasters;.a (iii) small population size; (iv) limited w w w diversification; and (v) high dependency on trade in goods and services. Economic m o development in PICs since their.c independence was characterized by the dominant te a g role played by large public sectors,h which were supported by substantial foreign s .a w aid. Despite plentiful aid perw capita, weak growth in PICs during the 1980s and w early 1990s came to be lookedm upon as a ‘Pacific Paradox’ (World Bank 1993), o .c te attributing it to the poora use of generous aid in comparison to similarly placed g h s island countries in the.a Caribbean and Indian ocean regions. Critical views have w w 10 been voiced from timew to time.

m o .c te a g h s .a w w w

m o .c te a g h s 9 The.a income groups defined by the OECD for the purpose of disbursement of official w w w development assistance are as follows: LIC per capita gross national income less than m o US$ .825;c LMIC: between US$ 825 and US$ 3,255; and UMIC: between US$ 3,256 and te a US$g 10,065. h s .a 10 These include Senate Committee of Australian Parliament and Centre for w w Independentw Studies, Sydney as well as by Professor Hughes (2003, 2004 and 2010). © Copyrighted Material 108 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material

Open Economies m o .c te a g h The PICs are open economies. In several cases, this is not because they haves low .a 11 w trade barriers, but because they are small with substantially large imports.w The w

PICs’ trade volumes in commodities (exports and imports of goods) expressedm as o .c te percentages of gross domestic product are fairly high (Table 6.2). a g h s .a w w w

m o Table 6.2 Trade Share of GDP .c te a g h s .a Country Trade share of GDP (2005-2009)w w w

Cook Islands 74.0 m o .c te Fiji 82.9 a g h s .a Kiribati 92.3 w w w

RMI 59.2 m o .c te FSM 56.9a g h s Nauru 166.9.a w w w

Palau m 115.7 o .c te PNG a 79.9 g h s Samoa .a 58.1 w w w Solomon Islands 55.1 m o .c te Tonga a 53.7 g h s Tuvalu .a 56.0 w w w Vanuatu 62.0 m o .c te a Source: ADB (2011)g h s .a w w w

m o On an average during the.c last four years (2005-09), trade volume ranged from te a g h 167 percent of GDP ins Nauru to 54 percent in Tonga. All PICs have to depend .a w upon imports for all commodities,w including staples such as rice and wheat. While w

m PNG’s major exportso are both minerals (gold, petroleum, copper, natural gas) .c te and tree crops (coffee,a tea, timber), Fiji’s chief exports have been sugar, mineral g h s water, garments.a and gold. For smaller island countries, which have negligible w w manufacturingw capacity, reliance on primary exports is much greater. Thus, PICs

m o are more competitive.c than complementary to each other as they seek the same te a g h s .a w 11 w In fact, the governments of PICs, which have limited capacities in domestic w

m revenue,o resource mobilization, taxed imports and exports to raise revenues for meeting the .c te growtha in public sector expenditures. In the case of Vanuatu, there is no direct taxation of g h anys kind. Hence, the government has been relying on indirect taxation, including taxes on .a w w importsw and exports. © Copyrighted Material Regional Integration in the Pacific 109 © Copyrighted Material

markets (Browne 2006). With liberalization in ANZ, which are traditional exportm o .c te markets for PIC products, exports including coconut milk and cream and othera g h s copra-based products have been finding it difficult to compete witha Thailand, . w w Malaysia and other Asian countries. w

m o .c te a g h s .a Exchange Rate Arrangements w w w

m o .c Out of 14 PICs, eight are dollarized. They have adopted the nationalte currencies of a g h Australia, New Zealand or the USA: Kiribati, Nauru and Tuvalus (the Australian .a w dollar); the Cook Islands and Niue (the New Zealand dollar);w and FSM, RMI and w

m Palau (the US dollar). The other six PICs have independento currencies of their .c te own. While PNG has a floating exchange rate regime,a five PICs, namely Fiji, g h s Samoa, SI, Tonga and Vanuatu, have fixed exchange rate.a regimes. All PICs have w w w been sourcing their imports from ANZ and the USA, who have been targeting m o inflation, which explains the low inflation in PICs. .c te a g h s .a w w w

Trends in Regional Integration Efforts m o .c te a g h Efforts for forging regional cooperation begans when five island nations, Cook .a w Islands, Fiji, Nauru, Tonga and Western Samoaw (now Samoa), in the South Pacific w

m soon after their decolonization in 1970o joined hands with ANZ to establish in .c te a 1971 the South Pacific Bureau of g Economic Cooperation. The name change to h s Forum took place when the northern.a Pacific states which were US Trust territories w w w became independent and joined the intergovernmental organization in the 1990s. m o The Forum establishment is largely.c funded by the two advanced Forum member te a 12 g countries. h s .a w Pre-dating the Forum, therew was one other organization known as South Pacific w

Commission, now called Pacificm Community (PC) after being enlarged in the mid- o .c te 1990s to include the northerna Pacific island states, RMI, FSM and Palau. The g h s PC was established in.a 1947 under the Canberra Agreement signed by Australia, w w France, New Zealand,w the Netherlands, the United Kingdom and the USA. The

m Secretariat of the Pacifico Community (SPC) located in Noumea, New Caledonia .c te a assists all 22 entities,g including 14 PICs, by providing technical advice, training h s .a and disseminationw of information in social, economic and cultural fields. w w The functions of the Forum Secretariat are: servicing the PIC governments; m o .c coordinatingte regional approaches in areas of common economic interest; a g h s .a w w w 12 As of 2011, the Forum Secretariat’s budget is funded mostly by Australia and New m o Zealand.c (70 percent) with another 15 percent by the European Union and other donors from te a outsideg the region with periodical contributions. Thus, the erstwhile colonial masters of the h s Pacific.a region have taken the lead, unlike in the Caribbean where integration efforts are w w purelyw CARICOM driven (Fairbairn and Worrell 1996). © Copyrighted Material 110 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material overseeing areas of functional cooperation and acting as the focal point for a range m o of associated institutions. Notably absent from the list of functions, as Fairbairn.c te a g h and Worrell (1996) observed in their comparative study on the South Pacifics and .a w the Caribbean island economies, are the issues of a single market and a commonw w currency. m o .c te Appendix 6.1 presents, in brief, the milestones of the long journeya towards g h s economic integration. Fry (2005) divides the 34-year history .a on regional w w cooperation and integration into more or less five distinct phases,w with some

m o overlapping. They cover the following: (i) 1971-1975: comprehensive.c regional te a integration; (ii) 1975-1980: sectoral integration; (iii) 1981-1985:g regional security; h s .a (iv) 1985-1990: collective diplomacy; (v) 1991-2000: harmonizationw of national w w policies; and (vi) 2001 and onwards to the present: new regionalism. m o .c In the early period, comprehensive regional integrationte was the main focus, a g h which could be justified on the grounds that small-sizeds economies, if they could .a w not get it alone, cannot realize the economies of scale inw manufacturing operations w

m and in purchase of essential items such as fuel ando medicines. Further, national .c te shipping lines, a university and a development banka would not be viable. g h s Attention was turned to sectoral integration in.a the second half of the 1970s. The w w w setting up of a regional University and creation of Air Pacific were some important m o achievements. However, there was some disillusionment.c with Air Pacific, on the te a g grounds that it was Fiji that had gained moreh from the common airlines. Over a s .a period, Nauru, Samoa, the SI, Tonga andw Vanuatu, while retaining shares in Air w w

Pacific, set up their own national airlinesm to promote tourist arrivals direct from o .c major airports in ANZ and the USA.te In regard to the regional University of the a g h South Pacific (USP) located in Fiji, sthere were some rumblings as well. Fry (2005) .a w w refers to the writings of Crocombew and Ueantabo (1976), which reflected the

m concerns of other island nations o that USP was partial to Fiji’s interests. .c te a Although USP responded tog various concerns by setting up Extension Centres h s .a and special campuses in Samoaw (Alafua) and Vanuatu (Emalus), the impression w w of yesteryears could not be easily erased. Samoa went ahead setting up its own m o National University of Samoa..c During the 2000 coup in Fiji, students enrolled at te a g h USP had to return to respectives island countries and their education was disrupted .a w for a while. The dormantw dissatisfaction surfaced again as some island nations w

m such as SI indicatedo their desire to set up a university of their own. .c te Sectoral integrationa did not proceed beyond USP and Pacific Forum Lines, the g h s shipping service..a Fry (2005) notes that sectoral integration in other areas required w w substantial outlays.w PICs were not prepared to sacrifice their autonomy and did not

m o prefer them.c being located in well-off PICs such as Fiji. The differences between te a g Fiji and otherh PICs quickly revealed a growing rift between PICs. So sectoral s .a integrationw was replaced by a more practical approach of collective diplomacy in w w many soft areas of cooperation, where conflicts were less likely. m o .c Thete Lome negotiations with the European Community in the 1980s, the a g h Laws of the Sea negotiations and environmental protection arguments at the .a w Riow Conference were some outstanding examples of success. Along with these w © Copyrighted Material Regional Integration in the Pacific 111 © Copyrighted Material

achievements, the regional security concerns of ANZ for containing former Sovietm o .c te influences in many PICs led to new initiatives to meet situations, such as Kiribatia g h s granting the Soviet Union access to fishing in Kiribati waters and similar overturesa . w w by Vanuatu. This gave rise to resentment in PICs against Australia that whilew ANZ

m had kept diplomatic relations with the Soviet Union, foreign policieso of PICs .c te a were dictated by the metropolitan states. Fry (2005) observes that theg late 1980s h s .a witnessed a shift in the approach of Australia. Its foreign policy pronouncementsw w w of 1988 indicated ‘a constructive commitment’, emphasizing partnership rather m o .c than an agency of western interests or Australian hegemonic aspirations,te which a g h represented past Australian diplomatic thrusts. In the 1990s, thes MSG countries .a w forged a trading bloc for free trade in selected goods (seew below for details). w

m Since there was no common secretariat to oversee implementationo of MSG trade, .c te progress was slow as MSG countries took time to preparea a list of agreed items, g h s instead of drawing a negative list, which would have been.a simpler. w w w On a wider regional level, the period witnessed efforts towards harmonization m o of national policies in the 1990s. The emergence .ofc ‘neo liberalism’ and wider te a g acceptance of the Washington Consensus of fiscal h and monetary restraints, financial s .a sector liberalization and public sector reforms pavedw the way for ANZ to tie them w w into their bilateral assistance programmes. Disappointmentm with the poor progress o .c of structural reform implementation led ANZte to reconsider past approaches. The a g h 9/11 terror attack of 2001 in the USA imposeds new responsibilities on Australia to .a w make the Pacific safer from the newly emergingw risks of terrorism as well as the w

m already known risks of money launderingo and gun-running. Additionally, ethnic .c te a rife and civil disorder in SI since theg late 1990s and the overthrow of an elected h s government in 2000 in Fiji caused.a fresh worries to ANZ. Furthermore, a study w w w by Hughes (2002) described some PICs, which could not effectively use the aid m o funds and undertake reforms with.c funds obtained from international and bilateral te a g agencies, with possible diversionh for personal use amounting to corruption and s .a w wastage as ‘failed states’. w w

Taking the cue from m Hughes (2003), an Australian Senate Committee (the o .c te Committee) held hearingsa on Australia’s Relations with Pacific island States in 2002 g h s and in their Report (Commonwealth.a of Australia 2003) concluded that a Pacific w w Economic and Politicalw Community, similar to the EU, should be a consideration

m in the medium to long-termo future of the region. The Committee also considered .c te a the region adoptingg a common currency, preferably the Australian dollar, for h s .a promoting fiscalw and monetary discipline. Following the Senate Committee’s w w observations in July 2003, Australia floated the idea of a single regional currency m o .c prior to thete Forum Leaders Meeting in Auckland in August 2003. Since the subject a g h was not includeds in the agenda, it was not formally discussed but it was decided .a w to examinew the idea of a single market, by appointing an Eminent Persons Group w

m (EPG)o to undertake a comprehensive review of the Forum with a view to exploring .c te areasa of regional cooperation. g h s .a Already, increased globalization since 2000 has thrown up some new w w wchallenges: The phased discontinuance of preferential treatment by EU for the © Copyrighted Material 112 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material products of PICs and the end of Sugar Protocol for Fiji’s sugar exports by 2007 m o under the Cotonou Agreement required PICs to re-structure their export industries.c te a g h for competing with the rest of the world for access to EU markets. The Cotonous .a w Agreement was to be replaced by a new agreement, known as the Economicw w

Partnership Agreement (EPA), on the condition that PICs should speedm up and o .c te promote regional integration on the lines of at least MSG. Further,a access to g h s Australia under the South Pacific Regional Trade and Economic.a Cooperation w w Agreement (SPARTECA) was also becoming less significant w (see below for

m o details). .c te a In the face of stiff competition from competitor economies outsideg the region, h s .a PICs had to take quick action in restructuring their economiesw and increasing their w w bargaining position. Further, having found themselves unable to attract foreign m o .c direct investment (FDI) in the immediate past, they wantedte to come together and a g h offer an assured large regional market without customs barriers for products, if .a w produced in any of the PICs through FDI. Necessitatedw by the EU offer of EPA w 13 m to be signed only on a regional basis, PICs signed oPICTA for ushering in FTA .c te among the 14 PICs by 2010. a g h s However, PICs were nervous at the prospect.a of any immediate removal of w w w barriers due to concern over the impact on local manufacturing as well as the impact m o on government finances due to loss of revenue.c from tariffs (Scollay 2005). Hence te a g they decided to keep ANZ out of PICTA. Persuadedh by the arguments of PICs that s .a they looked upon PICTA as a stepping stonew for an eventual closer relationship, w w including free trade in goods and servicesm as well as mobility of labour with ANZ, o .c 14 the latter agreed and in 2001 signed thete separate PACER with them. The PACER a g h required PICs to start negotiations withs ANZ by April 2011. In case, any PIC in its .a w w negotiations with EU on EPA wasw to give a reciprocal access to EU, and PACER

m 15 negotiations would have been deemedo to be triggered earlier than 2011. .c te a While PICs were confrontedg with problems of bewildering complexities h s .a involved in trade agreements,w the EPG submitted their draft Report. The PIC w w leaders met in Auckland in April 2004 to consider the Report by EPG, on the m o basis of which they agreed.c to evolve a Pacific Plan. The EPG reporting back to the te a g h Forum Leaders Meetings in April 2004 observed that although a Pacific economic .a w w w

13 The PICTA maimed at ushering in free trade among developing PICs (Fiji, PNG, o .c Palau, FSM, Samoa,te Solomon Islands, Tonga, Vanuatu) by 2010 and amongst all PICs, a g h including the remainings ones known as small and least developed PICs (Cook Islands, .a w Kiribati, Niue, Nauru,w RMI, Tuvalu) by 2012. After obtaining the legally required minimum w

m number of ratificationso by the respective legislatures, PICTA became effective on April 13, .c te 2003. a g h 14 Afters obtaining the legally required minimum number of ratifications by the .a w respectivew legislatures, PACER entered into force on October 3, 2002. w

m 15o PACER was expanded in late 2008 to include trade in services, capital flows and .c te investmenta as well as capacity building and promoting labour mobility in identified areas. g h Appropriatelys renamed as PACER Plus, it was approved in 2009 by the Forum Leaders in .a w th w theirw 40 Annual Meeting held in Cairns. © Copyrighted Material Regional Integration in the Pacific 113 © Copyrighted Material

union was one of the earliest goals of the Forum, the vision ‘remains incomplete,m o .c te though still a relevant objective’ (Pacific Islands Forum Secretariat 2004:a 27). g h s The EPG’s vision was a community of states engaged in deeper integrationa and . w w greater cooperation in areas such as transport, information technology, quarantine,w

m customs, security, judicial and public administration and regional law enforcement.o .c te a g h s .a Pacific Plan w w w

m o .c A Draft Pacific Plan was prepared in 2004 and adopted by the te Forum Leaders in a g h their meeting in 2005 held in PNG. The Pacific Plan spells outs in clear terms the .a 16 w goals termed as four pillars : (i) economic growth; (ii) sustainablew development; w

m (iii) good governance; and (iv) security (Pacific Islands Forumo Secretariat 2005). .c te The integration efforts of the kind envisaged by the Pacifica Plan did not go beyond g h s trade in goods and services and capital and labour mobility..a The goal of a single, w w w common currency along the lines of the euro is not a specific part of the Pacific m o Plan. The EPG Report, endorsed by PICs, made it clear.c that the time was not ripe te a g for a Pacific Union similar to the European Union.h s .a However, the military coup in Fiji in 2006,w the fourth in the series since w w 17 1987, halted the implementation of the Pacificm Plan. ANZ immediately imposed o .c economic sanctions against Fiji, which waste followed by suspension from the a g h Forum and the Commonwealth in mid-2009.s Australia excluded Fiji from the .a w PACER Plus talks in late 2009, creating furtherw tensions in late 2009. The PICs are w

m now divided into three groups: one agreeingo with two rich members of the Forum, .c te a Australia and New Zealand; the secondg supporting Fiji’s road map to democracy h s with elections scheduled in 2014; and.a the third not sure where they should stand. w w w The region is aware that in the past, three military coups in Fiji (two in 1987 m o and one in 2000) resulted in some.c setbacks, but the effects were only temporary. te a g The PIC leaders believe the currenth uncertainties would also eventually pass, as s .a w Fiji has assured other PICsw that its long-term vision of a well-integrated region w remains the same. m o .c te a g h s .a w w 16 Specifically inw regard to economic growth, the Pacific Plan seeks to integrate trade

m in services including othe temporary movement of labour in PICTA/PACER negotiations and .c te a create bulk purchasingg capacity for essential items such as fuel and medicines. The second h s item of bulk purchase.a has been on the agenda since 1971 without any progress, whereas the w w inclusion of tradew in services indicates the willingness of PICs to consider deeper integration,

m o of course for.c ‘a price’: liberalized immigration laws. Thus, the ball has been thrown in the te a court of advancedg Forum member countries to consider relaxation in immigration. The h s other three.a pillars are familiar ones. They are now part of heavy involvement of Australia w w w and New Zealand in the region: (i) provision of experts in financial management, public m o sector.c reforms and strengthening legal machinery, all contributing to better governance and te a sustainableg development; and (ii) provision of Regional Assistance Mission to Solomon h s Islands.a (RAMSI) to improve law and order in the ethnically divided nation. w w w 17 The Pacific Plan is scheduled for a review in 2013. © Copyrighted Material 114 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material

Unfinished Tasks m o .c te a g h Regional integration as a term has always been associated with trade in goodss and .a w services. Under RTAs, the fear of net welfare losses due to preferential wtrading w 18 arrangements is real. In the Pacific context, preferential trading m arrangement, o .c te even when nonreciprocal, has not been a great success. The earliest examplea is the g h s nonreciprocal trade agreement SPARTECA. .a w w w

m o SPARTECA .c te a g h s .a This nonreciprocal trade agreement signed between ANZ andw PICs, subject to w w Rules of Origin (RoO), allows duty-free and unrestricted access for specified m o .c products originating from Pacific island countries. t e The RoO stipulate that the a g h products should be manufactured goods in which at leasts 50 percent of the .a w ex-factory or cost of goods (material/labour) originatew from the PIC concerned or w

m any other PIC or Australia/New Zealand; and the lasto process of manufacture must .c te be performed in the PIC concerned. A 2 percent a margin of tolerance in certain g h s unforeseen circumstances may be applied to the .a50 percent rule, resulting in a 48 w w w percent requirement, but this provision requires specific approval. m o The SPARTECA was designed to address.c the unequal trade relationships te a g between ANZ and PICs. However, PIC leadersh were not happy with the stringent s .a RoO, since the latter generally restricted wthe scope of exports and value addition. w w

Critics argue that RoO failed to take intom account PICS’ dependence on imported o .c inputs in their simple manufacturingte activities. Furthermore, SPARTECA was a g h criticized for failing to address the mores restrictive non-tariff and technical barriers .a w w to trade, such as quarantine, sanitaryw and phytosanitary measures and standards.

m A study by the Pacific Islandso Forum (2007) examining RoO concluded that .c te a ‘SPARTECA did not promoteg significant export growth from PICs, both in terms h s .a of volume and compositionw (diversification)’ (Pacific Islands Forum Secretariat w w 2007: 4). m o However, there were .twoc successful exceptions: the export of automobile parts te a g h from Samoa and clothings and textiles from Fiji, which were helped by policy .a w w w

m o .c 18 The welfarete losses arise from trade diversion: that is, the losses from preferential a g h concession to a partner,s which result in replacing imports from the cheapest source with .a w expensive importsw from the partner country, are greater than gains from trade creation. w

m RTAs amongsto small-sized countries with similar products and less diverse in economic .c te structures, thusa being more competitive than being complementary in nature, would result g h in lower nets welfare losses as trade diversion possibilities would be much less. Aside from .a w the minimizedw welfare losses, there would be some gains: the small countries would be w

m able too mobilize, nurture and exercise their collective market power; the countries, being .c te ethnicallya and culturally similar, would be better placed to get together and harmonize g h variouss policies and hence trade diversion risks would be minimized; and if the number of .a w w countriesw is small, a cooperative solution is more likely. © Copyrighted Material Regional Integration in the Pacific 115 © Copyrighted Material

interventions over and above SPARTECA and by ad-hoc derogations from RoOm o .c te requirements. Since PICs with their high labour and public utility costs do not havea g h s any comparative advantage in manufacturing, the potential for new manufacturinga . w w export enterprises is limited. Morgan (2012) refers to the recently concludedw

m ASEAN-Australian-New Zealand FTA, which mandates removal of tariffso across .c te a the board for imports from ASEAN states by 2020 and notes that PICsg would h s .a lose out, as it would eliminate any margin of preference that Pacificw exporters w w currently enjoy. For this reason, he argues that RoO should be amended as an m o .c ‘early harvest’ from the PACER Plus negotiations, which could bete incorporated in a g h the final PACER Plus Agreement (Morgan 2012). s .a w w w

m Sub-regional Integration o .c te a g h s The only formalized sub-regional cooperative arrangement,.a as of now, was w w w originally between three Melanesian countries, namely PNG, SI and Vanuatu, m o which was founded in 1986 with a view to fostering.c political cooperation. Six te a g years later, economic cooperation received attentionh in the 1992 Summit held s .a in PNG. In 1993, the MSG Free Trade Agreementw (FTA) was signed, covering w w three products: tea (a major export of PNG),m canned tuna (a major export of o .c manufactured products of the Solomon Islands)te and beef (a major pastoral export a g h of Vanuatu). The three PICs also committeds themselves to grant each other ‘most .a w favoured nation’ (MFN) status, meaning wthat any concessions granted by an MSG w

m country to a non-MSG country would beo made applicable to MSG members. .c te a The MSG became a more formidableg entity soon after Fiji joined MSG FTA h s in 1998. During the next three years,.a 180 products were covered for free trade. w w w However, trade between MSG countries created more animosities than cordiality, m o as Fiji and PNG began to build. c up trade surpluses at the expense of the two less- te a g endowed countries. Vanuatu hrestricted biscuit imports from Fiji and in a tit-for- s .a w tat reaction, Fiji restricted importsw of Kava, a non-narcotic root-crop for making w beverages, by re-imposingm high tariffs. The kava and biscuit wars, as they are o .c te popularly referred to, a were the symptoms of the fully entrenched ‘domestic g h s industries protection’ .sentiments.a w w Intra-MSG tradew during 2003-05 was approximately US$30 million, which

m was only 6 percent oof all trade into the sub-region (Pacific Institute of Public Policy .c te a 2008). In 2005, ag revised agreement was adopted with the aim of further integrating h s .a the economies wof member countries, which received a further boost following the w w 2006 military coup. Fiji, which was isolated by political and economic sanctions m o .c by ANZ, solicitedte support from other MSG countries. Negotiations led to the a g h signing ofs an MSG Constitution in 2007 focusing on solidarity. A secretariat was .a w establishedw in Vanuatu in May 2008. There was renewed emphasis on greater w

m economico integration, not only in trade but also in services. It was agreed that .c te therea would be gradual liberalization of the negative list goods, reducing to zero g h s tariffs.a by January 2013. Members excluded sensitive goods from duty reductions w w wby placing them on a ‘negative list’. The MSG FTA also provided protection to © Copyrighted Material 116 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material

‘infant industries’ on the basis until such time they could grow and compete with m o goods from trading partners. .c te a g h Amongst the RTAs, MSG FTA appears to have emerged in recent yearss to be .a w more acceptable in Melanesia, mainly because of the dragging of PACERw Plus w negotiations and isolation of a fellow MSG country, Fiji. As a Pacific Institutem of o .c te Public Policy study (2008) notes, support for the MSG FTA empowers Melanesiana g h s governments to shift towards trade liberalization and resistance to .a protectionist w w pressures at a time when discussion of other (non-regional) agreementsw tends to

m o stimulate anti-trade sentiment. .c te a In addition to trade in goods, MSG leaders have taken yet g another initiative. h s .a This is in regard to greater mobility of skilled personnel betweenw MSG countries. w w If the Skills Movement Scheme is implemented, as planned from September 2012, m o .c about 450 trained teachers and nurses from Fiji would movete to work in Vanuatu, a g h meeting the current shortages in these two critical areas.s However, the reception .a w has been hostile. The Vanuatu Chamber of Commerce wdisapproved the scheme on w

m the grounds that it will be a disincentive for Vanuatuo youth to specialize in these .c te areas and will lead to greater unemployment. a g h s The economic space offered by MSG countries.a is small for facilitating intra- w w w island mobility of skilled and unskilled labour. The PICs with no manufacturing m o base would like to move around and work in .farmsc of bigger countries which have te a g real shortages of agricultural labour. It is hobvious that integration beyond MSG s .a countries, preferably with ANZ, would bew more beneficial, if labour mobility is w w encouraged. This is true not only for MSGm countries but also for smaller PICs like o .c Kiribati and Tuvalu. te a g h s .a w w Labour Mobility w

m o .c te a Since only a few PICs wouldg stand to gain from free trade arrangements in h s .a goods, a normal FTA is notw uniformly attractive to all PICs. In fact, that was w w one of the reasons behind the lukewarm reception on the part of smaller PICs m o including Kiribati and Tuvalu.c to sign PICTA and PACER. The only comparative te a g h advantage which PICss enjoy is the ‘export of labour’ to work on foreign ships .a w and on horticulture farmsw for fruit picking and other unskilled employment. The w

m idea of importing labouro has remained an attractive incentive for ANZ employers .c te to meet shortagesa in the farm sector. It was estimated that up to 50,000 seasonal g h s workers across.a New Zealand would be required at harvest time. In April 2007, w w New Zealandw introduced the Recognized Seasonal Employer (RSE) programme,

m o under which.c New Zealand employers are allowed to recruit overseas workers from te a g the Pacifich and South East Asia for seasonal work in horticulture and viticulture. s .a The w RSE programme began in April 2007. By April 2008, after a year of w w operation, 92 companies had been approved as RSE employers and 4,070 workers m o .c fromte the Pacific and South East Asia had RSE visa applications approved (Macllelan a g h 2008).s Data shows that mean gross seasonal earnings are around NZ$12,700 per .a w worker,w most of whom spend between three and seven months working in New w © Copyrighted Material Regional Integration in the Pacific 117 © Copyrighted Material

Zealand. A survey of RSE employers conducted in 2011 found that most havem o .c te enjoyed better quality, more productive workers and a more stable workforce (Guya g h s 2011) and that RSE workers have helped their businesses to expand. Froma PICs’ . w w point of view, the survey results indicated that it was providing valuable wincome,

m19 skills and experience that workers can take back to their home countries.o .c te a Australia introduced a pilot scheme, known as Pacific Seasonal g Worker Pilot h s .a Scheme (PSWPS), in 2009 and three countries were chosen: Kiribati,w Tonga and w w Vanuatu, each one representing Micronesia, Polynesia and Melanesia. Later on, m o .c PNG was added. In 2010, Nauru, Samoa, SI and Tuvalu were teadded to the list. a g h Under this pilot scheme, Pacific Islanders were allowed to swork in Australia as .a w fruit and vegetable-pickers for periods of up to six months.w About 2,500 Pacific w

m islanders were expected to benefit. However, the numbero was low. By March .c te 2012, only 1,100 workers were taken, which was far belowa the 7,000 Pacific g h s workers under New Zealand’s RSE scheme (Howes and.a Hay 2012). Although the w w w programme has been made permanent from 2012, problems relating to red tape m 20 o and lack of information would render the programme.c less attractive to employers te a g themselves (Curtain 2012). h s .a w w w

PACER Plus m o .c te a g h PACER Plus is an extension of PACER, whichs came out of concerns felt by ANZ .a w subsequent to its signing in 2001 in regardw to poor progress recorded by PICs w

m towards achieving the targeted Millenniumo Development Goals by 2015. It was .c te a also influenced by perceived poor ggovernance in PICs, which manifested in the h s coup of 2006 in Fiji, continuing ethnic.a tensions in SI and anti-monarchy protests w w w in Tonga. The new approach was towards developing durable partnerships with m o a view to (i) improving governance;.c (ii) increasing investment in infrastructure te a g and employment for recordingh greater economic growth and (iii) achieving better s .a w outcomes in health. Further,w it was visualized that similar to Doha Development w

Agenda’s for generating developmentm gains to the world’s poor, a comprehensive o .c te trade pact not only in tradea but also services would be necessary in the Pacific g h s region (Crean 2009). .a w w w

m 19 Vanuatu, whicho is one of the Melanesian countries with minimal migration .c te a experience to Australiag and New Zealand, is now benefitting more from remittances h s received from migrant.a workers than ever before. In 2007, 36 workers from Vanuatu went to w w New Zealand. Thew number increased to 1,855 in 2008, 2,024 in 2009, 2,049 in 2010, 2,521

m o in 2011 and over.c 3,000 are expected be sent in 2012. te a 20 Curtaing (2012) writes: ‘The Australian seasonal worker program is heavily h s managed .awith four federal government departments or agencies involved in administering w w w or monitoring it. This together with its range of requirements and compliance monitoring m o will discourage.c employers from taking on seasonal workers under this program, compared te a withg the options of using backpackers or illegal workers. Although some reporting h s requirements.a have been reduced (monthly reporting is no longer required), some processes w w seemw to have been made more complex.’ © Copyrighted Material 118 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material

In the Meeting held in Niue in 2008, Forum Leaders agreed to establish genuine m o regional economic integration of the type already enjoyed bilaterally by Australia.c te a g h and New Zealand and decided to commence negotiations in 2009. The proposeds .a w PACER Plus was to comprise a package of trade capacity and trade developmentw w assistance by Australia with New Zealand, the Asian Development Bankm and o .c te the World Bank, which were aimed at securing new opportunities fora PICs and g h s cushioning any short-term costs of adapting to the challenges of globalization..a w w PACER Plus is expected to address a number of issues commonw to the whole

m o region, which would include (i) how to comply with the quarantine.c requirements te a into Australia and New Zealand; (ii) developing consistent rulesg of origin within h s .a the region; (iii) the importance of improving aviation links tow encourage greater w 21 w tourism; and (iv) liberalization of the telecommunications industry (Crean 2009). m o .c PACER Plus is also to encompass: (i) Pacific Regionalte Infrastructure Fund for a g h underwriting critically needed investment; (ii) labour mobilitys with introduction of .a w a three-year Pacific Seasonal Worker Pilot Scheme, wwhich would help Australian w

m horticultural industry employers who are unable to sourceo local labour, providing .c te employment experience, remittances and training opportunitiesa in the region; and g h s (iii) training of public servants. .a w w w A research study indicates that there could be a significant increase up to m o 30 percent in trade volumes, from the elimination.c of regional trade barriers and te a g improved efficiencies, although that effecth will be due to the aggregate impact of s .a PACER Plus and all the existing RTAs (Institutew of International Trade 2008). In w w addition to benefits of free trade under PACERm Plus, which would be complemented o .c by other cooperation on trade facilitationte and direct technical assistance to PICs, a g h the aforementioned study highlightss the liberalization of the temporary movement .a w w of skilled and unskilled labour withinw the region, as it would enjoy strong support

m from the Pacific community. o .c te a g h s .a Challenges w w w

m o There are challenges as .cwell. Aside from the varying sizes and vulnerability of te a g h their economies to naturals disasters, there is chronic inadequacy of capacity to .a w fully realize the potentialw gains from trade. While Vanuatu in particular feared w

m loss of revenue aso a result of reduced import tariffs, since it depended only on .c te indirect taxes in a the absence of direct taxation, smaller PICs that do not have g h s any significant.a manufacturing base, except for meeting local needs such as copra- w w based soap, detergents,w and bread and biscuits, were worried that they would be

m o swamped by.c ANZ goods and services to the detriment of local businesses and te a g local employmenth (Institute of International Trade 2008). s .a w w w

m o .c te a21 The World Bank, which invested US $125 million in the aviation industry across g h sixs countries in the Pacific, looks to aviation to help expand economic development in the .a w w region.w © Copyrighted Material Regional Integration in the Pacific 119 © Copyrighted Material

It is therefore necessary to increase the supply side competitive capacity mof o .c te PICs; for example, through training the Pacific workforce, assistance toa meet g h s Australia’s stringent quarantine requirements, a more flexible application aof rules . w w of origin or the harmonization of regulatory requirements, that wherever wpossible

m are consistent with those required by other developed nations such as theo EU or .c te a the US. They also raised the complex problem of ‘fine tuning’ the balanceg between h s .a attracting foreign investment while retaining or possibly introducing wsubsidies and w w other direct assistance to support local industries and sectors, particularly those m o .c with future export potential (Institute of International Trade 2008).te a g h Considering the capacity limits of PICs to plan, negotiate ands implement a fully .a w fledged free trade agreement, Australia decided to provide technicalw and financial w

m assistance to PICs for raising their ability to commission theiro own PACER Plus .c te research and training for Forum Island trade officials toa prepare for negotiations. g h s Accordingly, an amount of Aus$500,000 a year, for three.a years, by Australia and w w w Aus$650,000 by New Zealand, in all Aus$1.5 million, was set aside to fund the m o Office of the Chief Trade Advisor (OCTA), to provide.c independent support and te a g advice to PICs Forum Countries over the course ofh negotiation. s .a OCTA, based in Port Vila, Vanuatu, started operationw in March 2010. However, w w the first incumbent did not complete m a three-year term. Due to differences o .c between him and ANZ, he chose to resign fromte his position in September 2011. A a g h replacement was made in February 2012. sBeing already engaged in negotiations .a w with EU for EPA, PICs who do not havew sufficient capabilities in their trade and w

m law ministries wanted OCTA to assisto them in their negotiations with the EU as .c te a well. It was a difficult compromise tog accomplish, as ANZ felt that OCTA funded h s by them was primarily meant for PACER.a Plus. w w w

m o .c te a g The Way Ahead h s .a w w w

There are increasing concernsm about the future of PACER Plus negotiations. o .c te Further, there were confuseda signals since the change in government in Australia g h s in 2011. A new international.a trade policy announced in April 2011 did not make w w any reference to PACERw Plus. Furthermore, the Australian government’s report

m to the World Tradeo Organization in March 2011, as part of its Sixth Trade Policy .c te a Review, failed tog mention PACER Plus (Morgan 2012). h s .a As of Augustw 2012, the PICs’ concerns are continuing. So far there is nothing w w beyond generalities, since meetings of the Ministers in October 2009 and April m o 22 .c 2010 did notte deal with details. The objective, structure and contents of PACER a g h s .a w w w 22 The negotiations are expected to be based on a few general statements made m o by Forum.c Trade Ministers during their meetings in 2009 and 2010. These statements te a recognizedg the capacity constraints faced by PICs when undertaking negotiations, and the h s need.a for national consultations with all stakeholders; the importance of deepening regional w w tradew integration affirmed that PACER Plus provides the Pacific region with a significant © Copyrighted Material 120 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material

Plus are yet to be concretized for a negotiation text. As Noonan (2011) pointed out, m o absence of a document for negotiations is a serious deficiency. These suspicions.c te a g h and fears would be eliminated only if Australia places on the table some tangibles .a w proposals. The latter will have to include firmer schemes beyondad-hoc measures.w w

Only concrete proposals for greater intakes under seasonal employmentm would o .c te convince PICs of the intentions of the two advanced Forum membera countries g h s which go beyond ‘unorthodox trade and development’ (Morgan 2012)..a w w Additionally, the decision of the Forum Leaders to keep Fiji awayw from PACER

m o Plus talks seems to cast doubts on the future of the talks. Although.c Fiji was a te a signatory to the original PACER agreement signed in 2001, Australia’sg argument h s .a that PACER Plus of 2010 is different from PACER is basedw more on political w w grounds than on logical reasoning, when the thrusts of the two agreements are m o .c economic and not different. te a g h To sum up, regional integration in the Pacific woulds continue to be an elusive .a w goal. There are regional rivalries, not only among wthe sub-groups within the w

m region but also among ANZ on one hand and the EU.o The negotiations between .c te the EU and PICs were initiated in 2004 and are stilla in limbo. It is understood that g h s if countries do not close negotiations by the end.a of December 2013, those not w w w classified as Least Developed Countries will lose duty-free and quota-free access m o to EU markets. .c te a g The PICs need OCTA’s help in their negotiationsh with the EU, which is denied s .a on the grounds that OCTA has been createdw primarily for PACER Plus talks. w w 23 Further, the continuing isolation of Fiji,m which is the second most important o .c country after PNG, and lack of progresste towards concretizing the objectives of a g h PACER Plus into a negotiating documents are serious issues to be resolved, if .a w w PACER Plus, the mother of all RTAsw in the Pacific, should take off.

m o .c te a g h s .a w w w

m opportunity too develop a truly innovative trade and economic agreement that takes account .c te of the differenta stages of development of each nation. g h rd 23 Theres were high expectations that a week-long 43 Pacific Island Forum Leaders .a w Meetingw in Cook Islands, held in late August 2012, a highlight of which was US Secretary w

m Hillaryo Clinton’s presence, would consider Fiji’s re-admission to the Forum by considering .c te ongoinga efforts for enacting a new Constitution by 2013 and conducting elections in 2014. g h Thes Forum decided against re-admission and preferred to wait until the elections when the .a w w neww democratically elected government would be in place. © Copyrighted Material Regional Integration in the Pacific 121 © Copyrighted Material

Appendix 6.1 History of Regional Economic Integration in the Pacific m o .c te a g h s Years/Period Events .a w w w 1947 Establishment of South Pacific Commission (SPC) by six countries: m o Australia, France, New Zealand, Netherlands, the United Kingdom.c te a and the United States. SPC was providing technical, consultativeg and h s advisory assistance in social, cultural and economic activities..a w w In 1998, with the inclusion of the Micronesian countriesw and

m northern Pacific States, which were former US Trust Territories,o the .c te name was changed to Pacific Community. The initialisma SPC is still g h retained. However, it stands for Secretariat of Pacifics Community. .a w There are 27 members. w w

The programmes of SPC consist of three sectors:m land resources, o .c marine resources and socio-economic sectors.t e a g The functions are provision of technical assistance,h education and s .a training and information/communication. SPCw is located in Noumea, w w New Caledonia. m o .c 1968 The University of the South Pacific waste established to provide higher a g h education and training that reflects thes aspirations and needs of PICs. .a The main campus is in Suva, Fiji,w and there are two campuses, one w w in Samoa, which hosts the School of Tropical Agriculture and one in m o Vanuatu, which hosts the Law Unit.c and Language Unit. te a There are University Extensiong Centres in other island states. h s .a w 1971 Establishment of South Pacificw Islands Forum by seven founding w members (Australia, Cook Islands, Fiji, Nauru, New Zealand, Tonga, m o and Samoa). Expanded later.c to include all 16 States, covering the te a g northern Pacific region.h The name was changed to Pacific Islands s .a Forum (PIF). It is popularlyw referred to as the Forum, which serves as w w the premier regional policy-making body of the self-governing states. m The Secretariato is known as the Forum Secretariat and its objective .c te is to service thea Heads of Government meetings; to foster and promote g h s regional economic.a cooperation, particularly on political, economic and w trade issues. w w

m o 1972 Establishment.c of the South Pacific Applied Geo-Science Commission te a (SOPAC).g Started as a UN Project for mineral prospecting in offshore h s areas, .ait assists member countries in identifying, assessing, and w w developingw mineral and non-living resource potential of extensive

m marineo resources. .c te a 1974 Establishmentg of South Pacific Regional Environment Programme h s .a (SPREP). SPREP aims to provide assistance to the member states in w w w the areas of protecting and improving the environment and ensuring

m o sustainable development for the present and future generations. .c te a 1977 g The Pacific Forum Line was founded for regional cooperation in h s .a shipping. It is a private company wholly owned by nine members w w w of the Forum. The share-holding members are: Cook Islands, Fiji,

m o Kiribati, Nauru, New Zealand, Papua New Guinea, Solomon Islands, .c te a Tonga and Samoa. g h s .a w w w © Copyrighted Material 122 Comparative Regionalisms for Development in the 21st Century © Copyrighted Material

Years/Period Events m o .c 1979 Establishment of the Forum Fisheries Agency (FFA). It provides te a g technical assistance in the development of fisheries management h s .a policies and in negotiations on the issue of licenses. Collection ofw fees, w w and surveillance of zones; collecting and dissemination of information m o on prices; shipping, processing and marketing of fish and fish.c products; te a focusing on management procedures, legislation, and agreementsg h s within and outside the region. FFA is based in Honiara, the.a Solomon w w Islands. w

m o 1979 Establishment of South Pacific Trade Commission (SPTC).c in te a Sydney to promote trade and development and encourageg Australian h s investment in island countries, through joint ventures;.a the SPTC holds w w exhibitions. w

m o 1980 Establishment of Pacific Island Development .cProgram (PIDP) in te a Honolulu under the East West Center. Membershipg covers all island h s countries regardless of political status. PIDP.a conducts research on w w topics identified by Pacific island leaders.w

m o 1980-1989 Period of Collective Diplomacy. .c te a g Successful negotiations with Europeanh Community on Lome s .a Conventions. w w w Negotiations on Law of the Sea. m Anti-nuclear dumping campaigno against Japan’s proposal to dump .c te a radioactive wastes in the Marianasg Trench, demonstrating collective h s action. .a w w Anti-drift netting campaignw against Japan and other environmental

m initiatives. o .c Institutionalization ofte understandings: a g h South Pacific Nuclears Free Zone Treaty (1985) .a w The Convention forw the Protection of the Natural Resources and w Environment of the South Pacific Region (1986) m o The Convention.c for the Prohibition of Fishing with long driftnets in te a g the South Pacifich (1989). s .a w 1990-1999 Period of harmonizationw of policies. w

Structuralm reforms. o Policy .dialogues.c te a g Donor-ledh reform programmes funded by Asian Development Bank. s .a Melanesiaw spearhead Group Trade Agreement between four w w Melanesian countries: Fiji, Papua New Guinea, Solomon Islands and m o Vanuatu.c for freer trade. te a g 2001 hPacific Island Countries Trade Agreement (PICTA) for free trade s .a w among the Pacific Island Countries by 2010. PICTA was signed in w w 2001. m o .c Pacific Agreement on Closer Economic Cooperation (PACER) for te a g forging greater cooperation and negotiations by Pacific island countries h s .a with Australia and New Zealand to start in 2011. PICTA was signed in w w w 2001.

m o 2003.c Australian Senate Committee recommendation for a Pacific Political te a g and Economic Community with a single currency. h s .a w w w © Copyrighted Material Regional Integration in the Pacific 123 © Copyrighted Material

Years/Period Events m o .c te 2004 Forum Leaders decided to have a Pacific Plan for integrating PICs a g h Preparation of Working Draft on Pacific Plan by Task Force. s .a w w 2005 Approval of Pacific Plan: Four pillars: of (i) economic growth; w(ii)

m sustainable development; (iii) good governance and (iv) securityo . .c te a g 2007 European Union’s efforts to bring about regional integration:h insistence s .a on signing an Economic Partnership Agreement (EPA) withw EU only w w on a collective basis with PICs. EPA is to replace Cotonou Agreement m which is lapsing in 2020. o .c te a g 2008 Deadline for signing EPA with PICS: December 2009.h s .a w 2009 No collective EPA. PICs were not ready. Fiji and wPNG signed interim w

EPA on individual basis with EU. m o .c Australia and New Zealand announced PACERte Plus for replacing a g PACER. h s .a PACER Plus is designed to cover beyondw trade in goods. It is w w designed to cover services, investment, capacity enhancement, trade m o facilitation and mobility of labour. .c te a g h 2010 Provision of assistance to PICs for helpings them in their negotiations .a with Aus/NZ for PACER Plus. Officew of Chief Trade Advisor is opened w w in Vanuatu and is fully funded by Australia and New Zealand. m o .c 2011 PACER Plus negotiations are scheduledte to commence in 2011. a g h s 2012 PICs request assistance of OCTA.a in their negotiations on EPA with EU w w Differences with Australiaw and New Zealand, which leads to

m resignation of Chief Tradeo Advisor. .c te The position of Chiefa Trade Advisor is filled from Feb 2012. g h No decision on PICs’s request for OCTA’s assistance for EPA .a w negotiations with EU.w w

Continued isolationm of Fiji from OCTA and Forum. o .c te a Source: Jayaraman (2007), Fry (2005),g Fairbairn and Worrell (1995) h s .a w w w

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