Updates On Developments In The Pacific

Dr Jane Kelsey, Action, Research and Education Network of Aotearoa (ARENA/NZ), to the International Coordinating Network WTO Preparatory Meeting, Hong Kong, February 2005


The South Pacific may seem a strange starting point for an input on the Hong Kong ministerial conference in December. It is about as far away from Geneva as you can get. But its situation shows how the WTO reaches the most remote parts of the world, including countries that are not and never will be WTO members.

The Pacific Islands lie east of Indonesia and north of Australia and New Zealand. They are small, remote and vulnerable to climatic disasters. Most of their people are subsistence farmers and fishers. Their governments depend on tariffs for between one third and half their revenue, supplemented by foreign aid and remittances. The small range of exports, and sources of wage work, centre on natural resources of fish, sugar, kava and minerals, as well as garments. These depend on trade preferences from former colonial powers of Britain, Australia, New Zealand, France and the US.

Despite this, the Pacific Islands are under pressure to immerse themselves in the global economy, to privatize, liberalise imports and remove restrictions on foreign investors, including ownership of land. That pressure comes from the World Bank and Asian Development Bank, through Poverty Reduction Strategy Programmes (PRSPs) that invoke the Millennium Development Goals to justify foreign control of key services. It also comes from aid donors, mainly Australia, New Zealand and the European Union, who define good governance as implementation of the neoliberal agenda.

There is no way these Islands can compete in the global economy. Theories of ‘comparative advantage’ mean continued export of natural resources by foreign companies with no added value. Reducing tariffs means cutting government revenue and increasing dependence on a VAT. Yet Pacific Islands governments say they have no choice. Preferential access to their main markets is eroding because their former colonial benefactors are lowering their tariffs and signing free trade deals with other countries. The European Union has insisted that all the African, Caribbean and Pacific (ACP) countries must negotiate reciprocal access for its goods under ‘economic partnership agreements’, which will also guarantee their transnationals rights in services, investment and intellectual property. Australia and New Zealand say anything the EU gets, they want too. Under Compacts of Free Association with Palau, the Marshall Islands and the Federated States of Micronesia, the US will also receive the same treatment they negotiate with the EU. In the hope that a stepping stone approach will somehow make all this manageable, the Islands have opted for a free trade agreement among themselves (PICTA), starting with goods and soon to be extended to services. But even that is looking unmanageable.

Worse, all these arrangements have to be WTO compatible, even though only three of the 14 Pacific Islands states belong to the WTO. Because those they negotiate with are WTO members, WTO compatibility means those rules will govern their economic life even though most are not, and never will be, WTO members. This has led some governments to suggest that they should join, so they at least have a seat at the table. But the experience of those who are WTO members shows that is a delusion.

Three Islands (Fiji, Papua New Guinea and the Solomon Islands) are founding members of the WTO. Since the first ministerial conference in Singapore in 1996 they have argued that the WTO needs to address the plight of small vulnerable economies. At every meeting the rhetoric of the Ministerial Declarations has recognised this; there is even now a small economies work programme. But it is going nowhere, because they simply don’t matter. Their desire for recognition even faces opposition from other countries in the South who fear a formal category would further ‘divide and rule’ – even though the shift of Brazil and India into the negotiating room of the Five Interested Parties last July seems likely to have a much more significant effect.

These three WTO Members have problems enough with existing rules. Under the Doha ‘Development’ Round they face demands for new commitments in services – including EC ‘requests’ that PNG and Solomon Islands remove restrictions on foreign ownership of land. NAMA negotiations on goods will impact on the sustainability, earnings and potential for adding value to their fisheries and forestry exports.

Fiji’s sugar exports will be drastically affected by the WTO panel finding against the EU. Renegotiation of the ACP countries Sugar Protocol with the EU will reduce the price that Fiji receives for sugar and may collapse the industry – which is the main wage employer in Fiji, along with garments. That would provoke an economic, social and political crisis. Meanwhile, the Europeans’ plan to bring subsidies for its own sugar producers within its Common Agriculture Policy could well see them continue if the proposals for so-called ‘box-shifting’ contained in the July framework on Agriculture are agreed to.

The potential for WTO membership to intensify existing economic, social and political instability in these Islands is enormous. Fiji has suffered two ethnically driven military coups in 1986 and 1999. The Solomon Islands is just emerging from a civil war. Papua New Guinea has chronic economic and law and order problems.

Recently I asked Fiji’s former Ambassador to Brussels, now the CEO of the Ministry Foreign Affairs and Trade, whether he would recommend that Fiji join the WTO if it wasn’t already a member. He thought for a while and said he probably would, so they had advance warnings of the tidal waves that were coming their way and could take defensive action, even though they couldn’t affect the decisions themselves.

Three other Pacific Islands are in the process of joining the WTO – Vanuatu, Samoa and Tonga. The first two are Least Developed Countries. The politics of accession are outrageous, far worse than the WTO’s Green Room and the bullying of existing members from the South. To join the WTO requires unanimous support from a Working Party. Any WTO member can join the Working Party and they have to be satisfied with what is being offered before a country can join. The major powers routinely demand WTO-plus commitments from some of the world’s poorest countries, as Cambodia has recently experienced. Vietnam and Lao are facing similar demands.

These concessions are used as leverage in accession negotiations with more economically important countries, such as Saudi Arabia and Russia – and previously China. The major powers also aim to create a critical mass in support of their various positions in the Doha round. So Australia and New Zealand as Cairns Group members routinely demand WTO-plus commitments on agricultural tariffs, export subsidies and emergency safeguards. The US makes equally outrageous demands on services. Few small countries have the skill base to assess the implications and are told they can’t join unless they agree. When accession is a debt conditionality, as it effectively was for Vanuatu in the later 1990s, they feel they have even less choice.

The experience of Vanuatu is especially significant. It completed this tortuous process and was supposed to be the first Least Developed Country to join the WTO, at the Doha ministerial meeting in 2001. Days before Doha the government backed off because the price was too high. Last year the government decided to reactivate the accession on the basis that Vanuatu was already facing requirements for WTO-compatibility through regional agreements and it would be better to negotiate accession on its own terms now than to have them dictated as another debt conditionality if Vanuatu faced a renewed economic crisis in the future. However, the government has asked the US to re-open its services schedule and allow it to withdraw foreign investment rights for health, education, audio-visual, environmental and retail and wholesale distribution. The US hasn’t replied – and the chances of it agreeing to create such a precedent are extremely remote. Vanuatu needs all the encouragement possible to stand firm and set an example for the few poor countries that still remain outside the WTO’s grasp.

But that is not the end of the story. In addition to the Doha Round/WTO accession, as members of the Africa, Caribbean and Pacific Group – the ACP - the Pacific Islands have just begun negotiations with the European Union for a regional ‘economic partnership agreement’ (EPA) under the Cotonou Agreement. ‘Partnership’ is the new buzz word, which is also being used to rehabilitate the World Bank agenda through the Poverty Reduction Strategy Programmes, and privatization and foreign control of key services through the Millennium Development Goals. It is the same old colonization in a new guise.

The EPAs will replace the preferential market access the Islands enjoy under the Lomé Convention, which has been critical for their sugar and canned tuna exports, with reciprocal rights for European products. The EPA is required to be WTO compatible - which the EC interprets to mean reciprocal trade in 90% of goods to be implemented in slightly more than 10 years.

The idea of a level playing field in goods between the EU and ACP countries is fanciful enough. But the Cotonou Agreement also includes the issues that the Europeans haven’t been able to get on the Doha agenda – notably competition and investment. It is ironic that the ACP fought so hard in Cancun to keep these ‘new issues’ off the table, but conceded much of that ground to the EU under Cotonou.

A further threat hangs over the Islands. Australia and New Zealand, their biggest export markets and main source of imports, bullied the Islands into signing the PACER agreement in 2002. Under PACER the Pacific Islands promised to negotiate a WTO-compatible economic integration agreement with Australia and New Zealand if they begin negotiations for a free trade agreement with another developed country, ie. the European Union. Such an agreement would devastate their revenue, their fledgling industrial and agricultural exports, food security and employment.

As with most poor countries, these negotiations pose huge issues of capacity. Fiji, which has the largest and most advanced bureaucracy, doesn’t have a trade lawyer on its team. Small islands are lucky to have one official to deal with this whole complex array of negotiations, with high turnover. Secrecy, lack of understanding and hostility of many government to trade unions, NGOs and other social activists means that local people are barely aware that this process is underway. Solidarity and empowerment is an urgent challenge.

In summary, the Pacific Islands are pawns in a game over which they have no control. Vanuatu’s decision to hold back from WTO membership, and based on that experience from signing up to PICTA and PACER, needs to be more widely known and built on.

Those of us whose governments are making these outrageous demands need to find ways to challenge their role in that process. This is not easy. Governments within the Asia/Pacific region that are rabid free traders have embarked on a rescue mission for the WTO and APEC through regional and bilateral agreements that are also designed to be WTO-plus. They justify this as meeting APEC’s ‘Bogor goal’ of free and open trade and investment by 2010 for the richer countries of the region plus volunteers (including Hong Kong China) and 2020 for the ‘developing countries’.

These agreements are designed to have the ‘demonstration effect’ that governments remain committed to neoliberal globalization. Often they do little more than lock in the neoliberal trade, investment, privatization and deregulation policies that recent governments have introduced, and prevent future governments from ‘backsliding’. For some governments, notably in Singapore and Chile, bilateral and regional agreements are also intended to create a ‘platform’ that will attract foreign investors to their whole region. Hong Kong performs a similar role for China.

There are broader foreign policy objectives as well. We know how the US in particular manipulates accession (yes to Iraq, no to Iran) in line with its imperialist agenda and insists on alignment of foreign and trade policy objectives in regional trade agreements with subordinate countries. Thankfully for us, it won’t negotiate with New Zealand so long as we maintain our anti-nuclear policy.

China is playing an interesting game. It was forced to make extensive commitments in its WTO accession. Yet it is now engaging in numerous free trade negotiations. Why? New Zealand came first because it was prepared to recognize China as a market economy – which set a vital precedent. That free trade agreement would merge with the bilateral investment treaties New Zealand already has with China and potentially Hong Kong. The effect on garment and other manufacturing in New Zealand has given rise to some China bashing. ARENA (which includes the New Zealand Clothing Workers Union) insists that Chinese workers are not our enemies. The problem lies with our governments and the neoliberal globalisation agenda.

China has since initiated free trade negotiations with Australia, New Zealand, South Africa, Brazil, Pakistan and Thailand. It is hard to believe that China wants to go further than it has at the WTO or may be required to during the Doha negotiations. That suggests at least three other factors are at play: China’s desire to establish its own hegemony in the region; to secure access to energy, mineral, forestry and fishing resources; and to create opportunities for its firms and investors. Of course, China and Hong Kong have their own Closer Economic Partnership, whose implications are not yet well understood by outsiders. The next link is ASEAN + 3 (China, South Korea and Japan). The regional circle is almost completed with talks just launched on an ASEAN free trade agreement with Australia and New Zealand. It remains unclear where other Asian regional players – notably India – fit into the game plan.

The Pacific Islands get rather lost in this bigger picture, which engulfs us all. I have tried to show why our focus on derailing the WTO meeting in December is important, but also that we need to keep the ministerial meeting in perspective. A failed ministerial does not solve the deeper problems that are endemic to the WTO itself and the outbreak of WTO-compatible agreements that are being initiated all around the world. As governments continue to ride this merry-go-round, often simply for fear of being left out, it is the responsibility of people’s movements to bring sanity to bear.

This broader overview suggests that campaigns around the Hong Kong ministerial need to look beyond the Doha Round to:


challenge the link between Poverty Strategy Reduction Programmes, the Millennium Development Goals, aid and trade negotiations as the tools for the major powers to achieve coherence across the IMF, World Bank and WTO;

2. expose accession as the WTO’s ‘dirty little secret’ where the world’s poorest countries are screwed so the major powers can advance their geopolitical agendas, through campaigns that confront the majors and empower movements in acceding countries to have their governments say ‘no’; and

3. ensure that our campaign on the WTO highlights the link between the WTO and the interlocking network of WTO-compatible regional and bilateral trade and investment negotiations and ‘economic partnerships’ that aim to extend and embed neoliberal globalization so that no country can escape or backtrack.

No comments: