2 April 2009, Port Vila, Vanuatu with Parliamentary Secretary for International Development Assistance, Bob McMullan
Joint Press Conference, Port Vila, Vanuatu
Subjects: PACER-Plus, Trade, Kava
SIMON CREAN: Bob McMullan, as Parliamentary Secretary responsible for overseas aid and me as Trade Minister, are here in Vanuatu as part of our first leg on a number of island nation visits. The purpose is essentially to engage in dialogue with the leadership of these countries but to also discuss with them progress going forward on the PACER Plus negotiations.
PACER Plus is something that has been initiated as a result of a previous decision by Forum Island Countries to activate such a trade negotiation once there was commencement of negotiations with the EC. Negotiations with the EC have now commenced so there is an obligation to look at PACER Plus.
We are very keen as part of this exercise to not treat PACER Plus simply as another trade negotiation. The whole purpose is to put the substance to the Plus. We understand the importance not of just trade liberalisation and open markets in terms of stimulating economies, because trade is stimulus. Trade grows faster than output, so any country – regardless of any development – must engage in trade.
But simply arguing the opening of markets isn’t of itself sufficient. Vanuatu is a very good example of that because it has the advantage of the SPARTECA Agreement which gave it open market access but it was unable to compete into that market as substantially as that agreement allowed it to.
So the second part of the policy, if you like, is not just opening the markets or addressing the issues at the border – it is making sure that nations are competitive, they are productive and they are able to take advantage of the market liberalisation. That’s where capacity building comes in, the question of infrastructure, of skills formation, of governance, and that’s where as well the commitment that Australia makes on the aid front.
We are very keen to try and go forward in a constructive and positive way engaging much more effectively in the capacity building dimension of this equation. And hence the reason for Bob and me being here.
PACER Plus and the way forward is already an agenda item for the leaders in Cairns in August. They have required Ministers to produce a report on how to take the PACER negotiations forward and this is the purpose for engagement in the dialogue. There will be a meeting of Trade Ministers either May or June - that date hasn’t been finalised - in advance of the leaders’ meeting.
We had very good discussions yesterday with the Prime Minister, the Finance Minister, the Foreign Minister and the Trade Minister. For Bob, of course, it is not his first time here – he has been here a number of times, particularly since we’ve been back in government. It is my first visit to Vanuatu but I’ve had a number of discussions with my counterpart, James [James Bule, Vanuatu Minister for Trade], and we are in regular contact.
The discussions yesterday were very constructive. The Prime Minister has indicated that his government is supporting the commencement of the PACER Plus negotiations. Part of our exercise here is not just to have discussions about the way forward but to try and get some better sense of the priorities for Vanuatu. Of course they are in the process of finalising negotiations on the Pacific Partnership that the Prime Minister has announced that is close to conclusion. What we want to do is to go forward in a constructive way. I’ve been very happy with the discussions we had yesterday. I look forward to continuing engagement. I will now ask Bob to talk about some important announcements that we made last night as well.
BOB MCMULLAN: Thank you very much Simon. It is a pleasure to be back. I’ve met several of you before on occasions when I visited. This is my fourth visit, I think, and it’s always a pleasure to be in this beautiful country.
Consistent with the primary purpose of the visit which Simon has just spoken of, I was able last night to announce that Vanuatu has been particularly successful in bids for the Australian Enterprise Challenge Fund. We set up this fund in 2007 to assist enterprises in countries in Asia and the Pacific to build businesses that have the potential to be successful businesses. They are not going to be subsidised for ever, they just need a small injection of money to get them started. They’ve got to have two characteristics: one is, if after there is a small injection of money they can be successful, and the second is when they can succeed and have a particular emphasis on assisting the poorest people in their various countries.
This year, in this round of grants, we have announced nine successful companies throughout Asia and the Pacific. The remarkable thing is from those nine, three are here in Vanuatu. I have a very warm spot for Vanuatu. It is not because we made a special arrangement to give you inside running. It’s not true. It is just that they were three of the best nine proposals we received from the whole of this region. And it comes to a total of almost $1.75 million for these three projects that we announced publicly yesterday.
Let me repeat it in case not everybody knows the details. There was one grant for Volcanic Earth which is a retailer and exporter of organic skincare products and traditional skin treatments. A cash injection will enable Volcanic Earth to establish a larger scale production facility and expand its exports. And that is why it fits in so well with Simon’s point. We can open the market but this sort of grant makes it more possible for people to take advantage of it to export to Australia. It should immediately create, as it is up and running, about 40 to 60 more jobs here in Port Vila. Very interestingly, about 900 – mainly women in Malekula – will be provided with livelihood opportunities supplying nuts to the project. So it has a lot of flow on benefits. Now that’s number one. In money terms, that is actually the smallest grant but it is very interesting and very positive.
The second relates to the biggest export industry of this country to Australia which is tourism, worth millions of dollars here. We all saw the big ship sail in this morning and there is a grant to Carnival Australia to enable them to assist people in Mystery Island, on Wala Island and on Champagne Beach to get more benefits from visits by cruise ships. People stop there, they get off the ship, they go ashore. They see how beautiful it is but they don’t get sufficient opportunity to spend their money which is actually the purpose. It is nice to have them come here and say ‘it’s beautiful’, but it is much better to have them come here and say ‘it’s beautiful’ and spend their money! This is to improve the jetty landings there, to build some facilities but particularly to train local traders so they can develop local trade initiatives to sell to the tourists. It is in addition to the benefit that flows to Vanuatu from its booming business with cruise ships, and has significant export assistance.
The third is to Marine Consultancy Services which is based in Espiritu Santo and currently runs a ship between Port Vila, and Santo. This will enable them to purchase a second vessel which will provide services to the outer islands. It will provide a reliable transport service to some of the people in the more remote provinces so that they can enhance their livelihood opportunities. They will have regular shipping services which are central to being able to service the rest of Vanuatu and maybe subsequently international services. So it is the three significant initiatives which will create jobs directly and create economic opportunities for people around the country.
We are very pleased that these things come together because I think it shows that there is …a big ‘plus’ in PACER-Plus. We’re interested in integrating the countries of the region into the world economy. Nobody has ever lifted their people out of poverty without engaging in trade with the rest of the world. But we are also interested in assisting individuals, companies and countries to take advantage of the opportunities. These are some important opportunities that will be good for the individuals concerned and good for Vanuatu. And I was really delighted to be able to announce it last night and to confirm it this morning. Thank you.
JOURNALIST: The first question that you must always get asked would be about the loss in revenue to government services, which is worth about 17% here. Is the Australian Government helping Governments in the region find alternative sources? Nobody seems to be worrying in the Pacific about that kind of loss.
SIMON CREAN: Well no. I think there is recognition of not just the issue, and we have been talking with the Government. We had a discussion again yesterday afternoon with the Finance Minister and we are prepared to continue to work with them. I think it is also important to understand that Vanuatu is as well seeking WTO accession. So of course that accession and the implications of that mean this revenue loss is an issue in any event regardless of PACER Plus. That being said, there have been alternatives developed within the region. The Cook Islands, which didn’t have a Value Added Tax for example, moved to establish one.
These are some of the issues that have to be looked at. It goes to the issue of the effective collection of the revenue base that is already there and we will continue to work with the government about alternatives because we are conscious of the issue. But, you know, in its own sort of way this is a similar issue that Australia faced over 20 years ago when we had to restructure. Whilst we were members of the WTO and we were fighting for agricultural market access, we still had pretty high goods market access and as part of opening our economy and making ourselves more competitive, we dropped tariffs considerably. We didn’t introduce an alternate tax system until well later in the piece. The point of mentioning that is because I think it is the fundamental truth of the argument that if you grow the economy by expanding the opportunities in trade, and that can only happen if you have both open markets and develop the competitiveness of the country to participate, the growth in economic activity is what can make up a significant part of the shortfall. And so, that’s why we’ve been concentrating not just on the technical side of alternatives but to really put the substance into the Plus.
JOURNALIST:You talked about the growth dividend, but Vanuatu is an economy that is already growing. The immediate effect of losing 17 percent of income would surely have a crippling effect on the Vanuatu economy?
SIMON CREAN: Well the fact that it is already growing significantly to some extent, that provides its own inbuilt cushion because there is growth and growth itself will produce additional revenues. What we want to do is continue to foster that growth activity. But you can’t generate growth unless what you are doing is engaging more effectively with the rest of the world. Australia understands that, with 22 million people, we can’t grow simply by producing for ourselves. We do have to engage with the rest of the world. This is not rocket science. This is an issue that all economies, regardless of their status of development, are going to have to increasingly adapt to. What we are trying to do is help that adaptation.
JOURNALIST: But Vanuatu’s economy is growing and it’s got closed markets.
SIMON CREAN: Well, it is also growing essentially because it does benefit importantly from trade, in particular the tourism sector which Bob has talked about. I think this is a solid base on which to continue to build the argument. But some of the things that we have talked about in terms of PACER Plus, is how we facilitate better trade in agriculture produce from here. We have very strict quarantine requirements but what we can do, through technical assistance, is use quarantine inspectors to help meet the benchmark against which the farm sector can produce. That is another avenue that is open. We can be creative with the labour mobility program and actually build skills development through the infrastructure that is within the region but targeted better to what the demands within the Pacific are. And there are going to be a lot of them for infrastructure. The government here is looking at questions of enhancing its infrastructure base. We know it’s the case. In many other nations within the region, they need skilled workers for that.
So, what we are trying to do, is to understand better what the demands in the economy are, what the opportunities are, what the potential is, how do we maximise that potential, etc. That is the challenge and we only get to understand it better by coming here and we have been quite open in terms of assistance on the technical side of things to address the problems that arise and we will continue to do so.
JOURNALIST: It sounds a little expensive for Australia. Is it going to be worth it, spending all this money in all these different countries?
SIMON CREAN: Well we’ve always understood the importance of aid for this region. And it isn’t so we can get access to new markets. Our trade surplus with these countries is already very high. The important thing for us and certainly the way the Rudd Labour Government has re-entered the field, so to speak, and the important thing for us is to develop an economic sustainable base for the region within the region. The bigger problem for us is if nations fail within the region. That’s the bigger problem. Because that will be a more costly exercise. It is far better for us to use the base of the existing aid program to look to how that can be supplemented but do it in a comprehensive and integrated way with the challenge of greater economic sustainability within the island nations.
JOURNALIST: In terms of capacity building, does Australia see the Pacific Island countries as being ready for PACER?
SIMON CREAN: I think that there has been a lot of confusion, I must say, on what PACER means. There has been a lot of, some of it is misinformation, some of it simply requires clarification. The answer to your question, and I don’t seek to answer for all of the nations, but we are engaged in the PACER negotiations because of a decision previously taken by all Forum island countries. It is an automatic trigger. The task for us is how we respond best to that trigger. Do we simply say, well you’ve signed up for this, you’ve got to do it? Or do we go about it by saying there is real opportunity if we get it right? We will take the time that’s necessary to explain where the opportunity can arise and work with them to realise that opportunity. I’ve got no doubt that if we work together in partnership…I’m certain that if we get it right it will be of lasting benefit to the region as a whole.
JOURNALIST: In your discussions with the Vanuatu Government, has kava been on the agenda, for example with the Minister of Trade?
SIMON CREAN: It has. Kava was well and truly on the agenda last night! They assured me it would help me sleep very well and I’ve had the best sleep I’ve had in the last week. So yes it was, and we are conscious of the issue. I think the complication here is in terms of an issue that we are trying to address back home in terms of our indigenous community. It was not raised, in fact Bob initiated the discussion in relation to it. So, yes, we’re aware of the issue and we’re trying to work our way through it.
JOURNALIST: I’d like to follow that up. Kava is something that everybody grows in Vanuatu and have been starting to grow commercially because of the increase in demands in Santo and Vila markets. Farmers on Santo last year said this is one thing that we can really do well in Vanuatu, we don’t have to move, we can keep in our own custom groups, we can keep it in our eyes, we can keep it in our village and we can still grow kava. Different from oil palm where 50 miles down the coast that we have to clear acres – we can destroy the land that we’ve been farming ourselves. We can go ahead and have our own subsistence gardening around us along with the kava, and we would just like to see our government signing markets for kava. If oil palm were grown, you would have to move and land would need to be cleared but with kava, people can grow kava along with vegetables in their gardens. Vanuatu is strongly placed to be the kava leader in the region. I'd like to see the Vanuatu Government find markets for kava. There are more varieties here than in Fiji. It might be a whole lot better for Australian indigenous communities than some of the other poisons provided by distillers. In the US FDA, kava is listed with tea and coffee. It would make a big difference if Australia were to change it's kava import regulations.
BOB MCMULLAN: We know it is a big issue and not just for Vanuatu. We are going to the Solomon Islands, we are going to Tonga and we are going to Samoa. People raise that issue in those countries and elsewhere. Let us get it clear. It is not totally banned in Australia. There is just a limit to how much individuals can bring in. So there is some trade to Australia already. And I don’t think we are ever going to become a very big market for kava but there is a significant islander population in Australia, not particularly from Vanuatu, but across the islands so that is some market for kava. We understand that, we are looking at the issue and we appreciate its importance to island countries. But we have to proceed carefully because this is a very sensitive issue in Australia because of its association with some serious problems in some of the remote indigenous communities in Australia, and we can’t just overnight change it because it is inside our country. These are the people most in need in our country, that we make special care that when we make changes, we take their interest into account.
We are aware of it, it is raised with me regularly, and I raise it back in Australia inside the government. We are not unaware of it, we are looking for new ways to address the problem. We won’t change it tomorrow morning but we are aware of the problem and people can be assured that the Trade Minister and the Prime Minister here and elsewhere are not shy, but are raising it with us. It is my fourth visit and the fourth time it was raised with me, so you can be assured that they do raise it and that we are aware of it.
JOURNALIST: Is it quite possible that the alleged abuse of kava was just one part of a whole basket of substances that are being abused in Australian indigenous communities?
SIMON CREAN: It is within a range of issues to do with substance abuse and we’ve taken action around those too. Some of those substances are illegal, some of the others are not allowed to be sold in those communities. There were a series of measures. This was not taken in isolation. It was part of a series of measures, I don’t want to air what we in Australia would say “our dirty linen in public” by talking about all the problems that led to this issue. It is a sensitive internal question. But I just want everyone in Vanuatu to know that Australia is not ignorant of their concerns. We know, and we don’t like banning the imports of things. It is not something we intend to do. It is a very rare thing in Australia. We don’t like doing it. It’s only done in response to extraordinary circumstances and we’ll try and find a way forward. I never promise what I can’t guarantee to deliver so I can’t tell you if we’re going to change it because it is not yet certain that we can but we are aware of the problem.
JOURNALIST: Why will PACER succeed when everything else has failed? Look at the goods deficit. Services is just paper money – people pushing pens sitting in offices. The service industry doesn't affect 90 percent of the population, many of whom don't even know where Australia is.
ANOTHER JOURNALIST: That is not really right if you look at the balance of goods. We have a goods balance of about 20 or so million dollars. In services trade, we have a deficit of 150 million dollars.
JOURNALIST: Considering ninety per cent of the population does not have a say or know anything much about Australia, how can the Australian and Vanuatu Governments negotiate?
SIMON CREAN: Well, if you look at the global economy, by far the most significant sector for economic growth in development is the services sector. This economy is in a better position than most to take significant advantage of that. That is not to say there should not be development in diversifying the economy. What we are approaching in terms of PACER Plus negotiations is in response to the priorities that the Government gives to support a whole range of areas in which activities can take place.
To try and answer the first part of your question, I am not too sure that other things have failed. It may well have been that SPATECA didn’t produce the benefits that it was held out for Vanuatu per se. This is the point that was made to us. But they know why they weren’t able to do that and it went to the capacity building issue.
Now the reason this can work, and there is no guarantee this can work, unless there is goodwill on both sides to make it work. The reason it can work is because we are going to put greater emphasis on the capacity building. That is our commitment and I think people will provided there is the political will, I’ve got no doubt the technical solutions exists. It is the political will that matters and that is why we are spending the time we are, building that political will, clearing up any of the misunderstandings, addressing the sorts of questions that people want to raise with us. If we get that right then there will be positive benefits for the region.
JOURNALIST: What ethical considerations are there in Australia negotiating PACER?
BOB MCMULLAN: I don’t understand why you think those people are going to be adversely affected, and why you think the Government of Vanuatu would sign an agreement by which they were going to be adversely affected.
SIMON CREAN: We have got to learn from the mistakes of the past.
BOB MCMULLAN: Can I just say if anybody wants more information about the Enterprise Challenge Fund, the ECF Manager, John Hardin, is here. If you want to chat afterwards to get a bit more detail about the Enterprise Challenge Fund, he is your man. Thanks very much.
[ENDS]
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