Pacific free trade idea is misguided
The National | Papua New Guinea | 3 August 2007
Pacific free trade idea is misguided
From time to time calls have been made for creation of a free trade area within the Pacific.
The latest of these was made this week by New Zealand’s trade minister Phil Goff on the eve of a meeting of Pacific Trade Ministers in Port Vila, Vanuatu.
Goff said the 16-nation Pacific Island Forum should “advance their vision of a single market in the Pacific. “What is needed is a comprehensive agreement much broader than simply free trade in goods,” he was quoted as saying.
Similar sentiments have been expressed by Australia’s political leaders, particularly prime minister John Howard.
From a practical point of view, a free trade agreement covering the Pacific region is unlikely to be worth the paper it is written on as far as Papua New Guinea is concerned.
Such an agreement would certainly benefit Australia and New Zealand, which are both global and regional exporters of a variety of commodities and products.
But an FTA is unlikely to make much economic sense for the smaller nations in the Pacific and even for Papua New Guinea, which is the largest and most populous developing country within the PIF.
Some smaller island nations, such as Vanuatu and Fiji, could possibly benefit through exports to Papua New Guinea, but given the great distances and the high costs of shipping and airfreight, this is also questionable.
Even though Fiji’s exports to PNG are more than 10 times this country’s imports from Fiji - in 2006 Fiji exports to PNG were worth K5.7 million while PNG’s exports there totalled K400,000 - the authorities in Suva have made it very difficult for a simple product like PNG-made corned beef to get into their country.
The quantities that would be exported would be so small that it is really not worth making a fuss over, leaving aside the principle of fair trade.
On another front, Air Niugini recently commenced flights from Port Moresby to Honiara and on to Nandi in Fiji.
Would you believe that the Solomon Islands government, friendly as they are supposed to be towards PNG, have refused to provide our national carrier with traffic rights between there and Fiji?
Sure Air Solomon is also flying there and could potentially be adversely affected, but some form of cooperation through code sharing or some other initiative would have resulted in a win-win situation all round with more air traffic generated in all three countries.
Qantas or Air New Zealand meantime can pick and choose which Pacific destinations they want to fly to and develop, having decided some years ago to stop flying to PNG in favour of code sharing with Air Niugini.
Governments in the region would have to be concerned at the effort being put in place to create a Pacific FTA when it would be hard to see what benefits could flow to the region’s developing island economies.
In the equivalent of one hour PNG would export more to Australia than its entire annual exports to Fiji; it would be the equivalent of two hours for Japan or less than four hours to the Philippines - in the unlikely event that government statistics for exports in 2006 to the Philippines (K1.2 billion) are accurate.
The only two other countries that register in terms of bilateral trade in Central Bank statistics are our close neighbour, Solomon Islands, and Vanuatu.
Most PIF countries would have stronger trade relations and greater potential for expansion in their bilateral trade with Australia and New Zealand, but in the longer term they need to pay more attention to developing bigger and more secure markets in the Asian region.
Issues such as the proposed Pacific FTA or the possibility of using the Australian dollar throughout the Pacific, which seems to crop up in Australian academic journals from time to time, are just a distraction from the more important task of promoting the Pacific in Asia.
Because Australia and New Zealand continue to push this agenda this has also been picked up by institutions such as the Asian Development Bank.
Sadly this is not the route to improved economic performances or better investment climates in virtually all the PIF member countries.
