News Analysis: Australia's deal on Pacific regional cooperation not to reach full potential

Australia's strategic agreement on economic cooperation in the Pacific will be undermined when the region's two major economies formally announce they will not sign it.

Pacific Islands Forum (PIF) countries have agreed in principle to the legal text of the Pacific Agreement on Closer Economic Relations (PACER) Plus in August after Australia and New Zealand announced a joint funding package to facilitate legal changes and modern customs clearance systems within the Pacific.

Negotiations on market access provisions for the regional free trade and development deal were due to be concluded in October, with the treaty signed by the yearend, however the legal provisions show only eight of the 16-member state's signatures are needed for it to come into effect.

Negotiations for PACER Plus began in 2009.

Papua New Guinea (PNG), the Pacific's largest economy, however has refused to take part in negotiations, while its main competitor in the region Fiji, is seeking larger concessions from Australia and New Zealand after re-entering talks in August.

"(PACER Plus) would have an adverse impact on our development and the development of our Pacific Island neighbors. Fiji wants an enduring, predictable and sustainable trade agreement and in our view we still have not got one in our negotiations thus far," Fiji Prime Minister Frank Bainimarama told business representatives in Auckland in mid-October.

"The current document is too one-sided, too restrictive, places too many obligations on us that we cannot afford to meet."

Fiji has said it won't sign the trade treaty unless there were better terms on infant industries and the most favored nation clause that gives the same preferential access to economies under the deal if another signs a free trade agreement.

The Pacific island wants to protect its fledging textile industry that's resurging thanks to demand from high-end Australian and New Zealand fashion designers seeking quick manufacturing, while also eyeing trade deals with other markets, Deputy Director of the Development Policy Center at the Australian National University's (ANU) Crawford School Matthew Dornan told Xinhua.

"(Fiji) wants to be able to make deals with other countries outside of PACER Plus and not have those deals undermined," Dornan said, adding Fiji would be obliged to lower its tariffs with PIF countries when preferential deals are signed.

The European Union is currently in negotiations for a comprehensive economic partnership agreement with all 14 Pacific island economies, covering trade in goods, services, development cooperation and trade related issues such as sustainable development and competition.

The PACER Plus pushed by Australia and New Zealand seeks to tackle regional development priorities by growing economies through increased trade and access to international markets. Analysts however believe it is unlikely to make any impact.

"The most significant aspects (of PACER Plus) ... were always the labor mobility component and the development assistance component," Dornan said.

"Development assistance continues regardless of whether the deal is struck or not, and the labor mobility access is now increasing for Pacific islanders, but that is outside of the deal itself."

Australia and New Zealand have pushed for labor mobility provisions to be included in an annex rather than the main text. Critics suggest it is to avoid setting mobility precedence as both countries continue an ambitious trade agenda with their Asian neighbors.

Australian Trade Minister Steve Ciobo told Xinhua Pacer Plus negotiations are still ongoing and Australia is "keen to work with negotiating parties" to conclude market access negotiations and sign the agreement by the end of 2016.

"We continue to pursue agreement with negotiating parties as a means of boosting trade and investment in the region," Ciobo said.

It's expected both Australia and New Zealand will make concessions in the infant industries provisions.

The deal will still go ahead should Fiji and PNG not sign, but "it's just not going to be as important as it otherwise would," Dornan said. Endit