South-South and North-South Trade Agreements: The Pacific islands Case

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UNU Institute on Comparative Regional Integration Studies
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UNU-CRIS Working Paper
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In the paper it is argued that given the economic characteristics of the PICs it was never realistic to expect that South-South FTAs such as PICTA and MSGTA could make a major contribution to addressing their trade needs. These FTAs are appropriately viewed as stepping stones to more ambitious steps toward integration with the global economy. Their effectiveness as stepping stones has been impaired by delays in their implementation. They have however provided PIC officials and politicians with valuable experience in the negotiation of modern trade agreements.

It is further argued that the EPA negotiations were driven by an external logic of little immediate relevance to the trade needs of PICs other than Fiji and Papua New Guinea. Efforts by the PICs to widen the scope of the EPA to deliver development-related benefits of greater consequence to themselves have so far been largely unsuccessful. In the meantime the EPA negotiations have absorbed an enormous proportion of the time and resources that the PICs are able to devote to trade issues.

Australia and New Zealand are in many respects natural partners with whom the PICs might consider deeper economic integration. Integration that is based solely on trade will not however deliver the development-related benefits that the PICs should be seeking in integration with these partners, and is unlikely to offer significant benefits beyond existing trade arrangements with them, while requiring significant adjustments on the part of most PICs. It remains to be seen whether the proposed PACER-Plus negotiations can be directed towards the establishment and implementation of an integration framework capable of delivering major development-related benefits to the PICs. Initial signs are not encouraging, but it is too early to be entirely pessimistic.

In the meantime their preoccupation with the EU and Australia and New Zealand appears to have prevented the PICs from paying attention to developments in the East Asian region, which would be the natural direction in which the PICs might look for additional trade and economic partnerships. The spread of FTAs in East Asia means that the PICs are facing progressively increasing discrimination in these markets. This issue will need to be addressed if the PIC retain ambitions of developing meaningful trade and economic partnerships in East Asia.