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APIBC ANALYSIS : 29th Jun 2017
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Pacific Free Trade a Big Plus

Member company PLN Australia shares an overview of PACER Plus and what it's successful signing with 13 participating countries will mean.

— By Damian Kelly, PLN Australia

Introduction

After months of negotiations ten countries have finally signed the PACER Plus agreement, creating a new era of economic cooperation in the South Pacific. On 14 June 2017 in Nuku’alofa, the capital of Tonga Australia, Cook Islands, Kiribati, Nauru, New Zealand, Niue, Samoa, Solomon Islands, Tonga, and Tuvalu all signed, making the agreement international law. Marshall Islands, Micronesia, and Palau have also resolved to be signatories to the agreement, however, were unable to make it to Tonga for the ceremony due to transportation issues.[1] This means the agreement will help businesses and individuals across 13 countries gain far greater access and more opportunities in a US$1.4 trillion market.[2]

 

New Business Opportunities

PACER Plus will open businesses in the region to new commercial opportunities in exporting and investing across the region. Barriers against trade, such as tariffs and regulations, will gradually be removed or improved. This will coincide with the removal of governmental red tape increased transparency, labour mobility, and development assistance across the region. This multipronged approach will collectively create a better financial climate for business in the Pacific

Given the differing economic makeups and needs of each signatory, PACER Plus has adopted a variable approach in both its reduction in tariffs for each jurisdiction (which will fall between 85% and 99% of all imports) and the timeframes for implementation. For larger and more liberal economies, the reduction on tariffs will take less than three years to implement, while smaller jurisdictions which are much more reliant on developmental assistance will incrementally reduce tariffs over the next 25-35 years. This means businesses will have opportunities to access new markets at different times, and rates. The flexibility of the agreement and its tailoring to each of the unique island economies is unlike other FTAs meaning that local businesses will be able to compete and enter into larger global supply chains with international standards.

One of the major long term goals of PACER Plus is to modernise the current governmental processes that accompany trade, bringing domestic regulation in line with World Trade Organisation (WTO) rules. Modernisation will include systemised and more efficient trade procedures that will reduce the cost and quicken the process of trading goods between jurisdictions. PACER Plus will also restate the WTO sanitation rules, requiring economies, such as Kiribati, Nauru and Cook Islands, to introduce modern procedures promoting human hygiene and protect biodiversity. This modernisation will also include standardised rules on quality control, which will ensure member states are producing products and services at an international standard. To help facilitate this, governments and businesses will have access to a Development and Economic Cooperation Work Programme.

Alongside other modernisation procedures, PACER Plus is making it easier for businesses to know their rights and have access to government information through the introduction of new transparency requirements. Governments will now be required to promptly publish laws, regulations, procedures and administrative rules of general application to the agreement in an online format, giving businesses and individuals access to resources from anywhere in the world. This will fundamentally change the way FDI occurs across the Pacific, with businesses now having access to government documentation outlining changes ideally ahead of the time they take effect, meaning businesses will be able to plan and take advantage of new opportunities. 

In line with creating an effective investment environment, signatories have committed to five major areas of investment opportunities:

  • agriculture, hunting and forestry;
  • mining;
  • fishing;
  • manufacturing; and
  • electricity, gas and water. 

In these sectors foreign and new businesses will be treated equal to local established businesses, meaning entrepreneurs will have priority access to the biggest infrastructure, industrial and public-private partnership projects across the region.

Businesses will also be able to access the best skills across the region, with PACER Plus creating better rules for skilled labour visas. Businesses will be able to supplement their seasonal and longer-term labour needs with reliable workers, which will help to alleviate one of the problems of conducting business in a highly isolated region. Additionally, employees will have access to new upskilling training and higher incomes. Although the agreement does not deal with semi-skilled and unskilled labour movement, the signatories have committed to creating a new labour mobility framework that will close the gap between countries and enhance Pacific regionalism.

Australia and New Zealand have committed to assisting island nations with a Readiness Package and an Implementation Package, which will support the smaller Island economies in achieving ratification. They have also committed to assist with the general administrative requirements as PACER Plus rolls out. Funds will also be directed to trade facilitation through Pacific Trade and Invest (PT&I) and private sector development through the International Finance Corporation (IFC) and Asian Development Bank (ADB). Private sector development will increase investment funds available for modernising business practices enabling companies to compete and enter into larger global supply chains with international standards.

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