The regional PACER Plus trade agreement will not pose a threat to Papua New Guinea’s manufacturing sector, but could rejuvenate it, according to Edwini Kessie, Chief Trade Adviser of the Pacific Island Countries, who spoke with Business Advantage PNG.

PNG’s Trade Minister Richard Maru has told local media his government will not sign up to the agreement, saying it was being ‘pushed by Australia and New Zealand’.

Maru said PNG ‘is not in position to be part of PACER Plus [or] any trade agreement with Australia, New Zealand and other Pacific Islands that reduces employment.’

‘PACER Plus in its current form, especially the push to remove tariff and duty, will kill our manufacturing sector,’ he added.

Tariffs

However, the Chief Trade Adviser of the Pacific Island Countries, Edwini Kessie, says that PNG and other Forum Island Countries are not being requested to remove all their tariffs under the Agreement.

‘This is certainly not the case,’ Kessie has told Business Advantage PNG.

‘The rules of the World Trade Organisation (WTO) only require parties to a free trade agreement (FTA) to eliminate duties on substantially all their trade.

‘The greatest benefit of PACER Plus to PNG will be to afford it a unique opportunity to reduce its dependence on natural gas, minerals and commodities and diversify its economy with the assistance of foreign direct investment.’

‘This is usually understood to mean that FTA parties have to eliminate duties on roughly 80% of the volume of trade between them.’

He said about 75% of PNG’s tariffs were already duty-free and as such PNG would not have to do much to comply with the WTO standard.

Kessie says that, according to PNG Treasury figures, import duties on goods from all countries, including Australia and New Zealand, will be K328 million in 2016, compared to K296 million in 2015.

Safeguards

The PACER Plus draft agreement will also enable the Pacific Island Countries to withdraw or modify tariff concessions and impose safeguard measures to protect their infant industries.

‘About 75% of PNG’s tariffs were already duty-free and, as such, PNG would not have to do much to comply with the WTO standard’

He added that with or without a trade agreement, there can be job losses in some non-performing sectors, while there will be job creation in other sectors, but ‘on balance, PACER Plus will have a positive impact on PNG’s economy’.

Chief Trade Adviser, Edwini Kessie

‘The view that there will be job losses is predicated on the belief that there will be increased imports which will swamp the market and squeeze out domestic producers, who will then have to lay off workers.’

But countries can choose under the Agreement not to eliminate tariffs on sensitive products or sectors, he said.

‘If you look at the dynamic economies in the world with very low unemployment rates, they have very low or virtually no tariffs on most items. By contrast, countries that have high unemployment rates are usually those with very high tariffs.

Benefits

‘The greatest benefit of PACER Plus to PNG will be to afford it a unique opportunity to reduce its dependence on natural gas, minerals and commodities and diversify its economy with the assistance of foreign direct investment.

‘There is a symbiotic relationship between trade and investment and countries which have succeeded in attracting foreign direct investment, particularly into the non-extractive sectors, have achieved [more] impressive growth rates than those which have been less successful in attracting investment.’

Kessie singled out tourism as one such sector, noting that notwithstanding the extraordinary beauty and diversity of PNG, ‘its tourism sector is yet to achieve its full potential’.

‘Smaller islands in the Pacific have been more successful than PNG in this regard,’ he said.

‘With PACER Plus, PNG can attract investment into this sector and attract tourists not only from Australia and New Zealand, but also countries in Asia, particularly China.’

Participants in the PACER Plus negotiations are:

• Australia
• Cook Islands
• Federated States of Micronesia
• Fiji
• Kiribati
• Nauru
• New Zealand
• Niue
• Palau
• Papua New Guinea
• Republic of Marshall Islands
• Samoa
• Solomon Islands
• Tonga
• Tuvalu
• Vanuatu