Negotiations towards a free trade agreement involving Australia, New Zealand and 14 of our neighbouring Pacific Island countries are underway this week in Port Vila, Vanuatu.
The agreement, known as PACER-Plus, aims to enhance development through greater trade in the region. However, the negotiations are being carried out on unequal playing field, with Australia and New Zealand leading the talks which involve largely small, underdeveloped island nations, five of which are listed by the United Nations as among the least developed countries in the world. Recognising this, Australia and New Zealand are funding the negotiations as well as providing assistance to Pacific Island countries to implement the agreement.
Despite insisting that promoting development in the Pacific is the priority, Australia stands to gain more than most of the Pacific Islands, which already have tariff-free access for their goods into Australian markets under previous trade arrangements. Among the issues expected to be discussed in Port Vila is trade in services, which would mean Australian companies, providing services from banking to health and education, would have unrestricted access to Pacific Island markets, and Pacific Island governments would have less rights to regulate them.
The logic for including services in trade agreements is that established private service providers, in this case based in Australia or New Zealand, would be enticed into Pacific markets through deregulation, and Pacific Island nations would benefit from increased access to the service they provide. Indeed, the entry of international telecommunications companies into a number of these island economies did improve mobile phone coverage and connectivity, including in rural areas.
However, opening up all service 'markets' in vulnerable economies poses many threats. The inclusion of services in a free trade agreement restricts the regulation of any service which could be considered to have any commercial activity or where there are one or more service providers. This deregulation and entry of private service providers is often followed by pressures to privatise essential services like water. In countries like Argentina and Bolivia private companies have raised prices and have not invested in infrastructure in unprofitable areas.
Additionally, services are typically negotiated on what is known as a 'negative list basis' — meaning that all services are included unless they are specifically excluded. This means that