3 April 2009
Interview: ‘Fetu’ (Star) FM, News in Focus, with Cherelle Jackson
Location: Australia Pacific Technical College, Apia, Samoa
Subjects: PACER Plus
Cherelle Jackson:Talofa, Simon Crean. Thank you for taking time to answer some questions. No doubt you’ve seen first hand the economic activities of not only Samoa but other Pacific Island countries you have come across in your visits. Now let’s start with the benefits of PACER Plus. What does Samoa has to gain from endorsing PACER Plus in the Pacific Region?
Mr Crean:I think of all countries have to gain is the fact that world trade and trade activity is a multiplier of economic growth. Over the last 50 years, world trade has grown three times faster than world output. So any country, no matter what stage of development it is at, if it wants to secure it economic future, is going to have to trade. It is the reason Samoa is seeking accession to the WTO. It is the reason that the Solomons already, for example, is a member of the WTO. So the benefits of trade are apparent in a widespread sense.
That said, we’ve given preferential trade access to the Pacific through SPARTECA. It is true to also observe that not all countries have been able to take full advantage of that preferential access. The reason for that is because their industries and their workforces haven’t had the ability to take advantage of the opening markets. So there is really a parallel track required here. It is opening up market opportunities. It is addressing the capacity deficiencies within countries to enable them to compete. What we’ve observed - and we’ve been to four countries, Vanuatu, Solomon, Tonga and Samoa - all of them have got different and diverse opportunities to expand their economic bases.
Samoa, for example, is an integral part in the automotive chain. It opened its telecommunication sector to experiment with call-centre facilities. Tourism of course is an important component. So what we’re trying to do is to encourage a new framework of thinking - a regional framework that recognises trade is important, but so too is capacity building. On PACER Plus, we want to put substance into the ‘Plus’. It is the reason that I’m travelling with Bob McMullan, who is responsible for international aid and AusAID specifically, to get much better coordination between the focus of aid efforts - whether its for multilateral sources or bilateral sources - with Australia to develop aid for trade, and to build the capacity to enable countries to take better advantage of the market opportunities.
Cherelle Jackson:The AusAID commissioned study on benefits and challenges on PACER Plus indicates a 30% increase in trade volumes from the elimination of trade barriers and you have spoken about this on numerous occasions. On the other hand, the Nathan Associates research, which was commissioned by the Pacific Island Forum Secretariat, suggests a loss of up to 14% of Samoa’s income alone from imported goods taxes - and that is estimated to amount to millions. Mr. Crean, can you tell us what these numbers mean to you?
Mr Crean:Well these are issues that each country is going to have to assess individually. The Cook Islands has developed alternate mechanisms to reliance on tariff revenue. In all the discussion that we’ve had - and we acknowledged that this is an issue - all countries accept that they can work their way through this issue. But the bigger point is that the potential for overcoming the deficiency comes from the growth dividend. If the argument is right that trade and trade flows grows faster than world output, then by embracing trade, engaging with it, and building a capacity to undertake it, you actually grow the economy quicker, and you get your revenue streams through other forms. It was also interesting that when we were in the Solomon through the RAMSI initiatives - that were in part about economic capacity building - cracking down on tax avoidance has itself yielded a very significant increase in tax revenue. So I think the tax revenue issue can be addressed, we acknowledge that it’s an issue, but we think it can be addressed.
Cherelle Jackson:PACER Plus will open up Pacific Island services to Australia and New Zealand - well established corporations and basic services (sic) such as health, education, water and electricity. How can Australia ensure that local businesses, manufacturers and producers are not wiped out by foreign competition?
Mr Crean:By encouraging them to develop the skills to compete more effectively, to provide those services at home, and to expand the service base. That is what facilities like this [the Australia Pacific Technical College], we’re in today, are all about. If we’re going to develop the skill base of the people, there has to be training, and training that establishes accredited standards so we - through the aid program together with other countries, Japan, China, New Zealand - are putting important investments into the institutional fabric within the region. We do see the importance of the Australia Pacific training college network in addressing this skill deficiency - but at the same time equipping the work force of the country concerned with more marketable services, more marketable training and skills, which may have significant application here and in the wider region.
What we want also develop is a labour market mobility program that builds off the pilot program that is the Seasonal Worker’s program. Why should that be a program, simply limited to seasonal fruit pickers coming to Australia? Why not develop the basis for mobility within the region given the big infrastructure spends, given the big resource development initiatives within the region - the PNG Gas Pipe Line, the Gold Ridge Gold mine. These all require skills, many of which we’ve seen, being taught here. If what we can do is to work with the businesses, to identify their skill needs, to use the APTC to help deliver those skill needs, you develop a much more mobile work force within the region.
Cherelle Jackson:The AusAID commission study as mentioned before, which identifies the benefits and challenges of PACER Plus, suggests a two year preparatory phase for the agreement, and I understand you’ll be bringing forward PACER Plus into the Australia meeting.
Can you tell me if this will be observed - the two year preparatory phase?
Mr Crean:I don’t want to put a time limit on it, if we can’t get there we don’t have an agreement, let’s be honest about that. But what I do want to do is to commence the process so that we can see what the issues are and what the challenges are. Now we’re provided funding for two important initiatives that help countries make their decisions about this.
One is an individual research program for every country in the region, by which they can undertake their own stocktake - what are the challenges, what are the issues, whether its revenue, what are the future industries - so that we can all be better informed as to what the issues are.
The second is to fund the Office of the Trade Advisor. This is going to be a mechanism to coordinate activities across the region, because some of the issues we negotiate are going to be common. We need a mechanism for dealing with them on a regional basis. But there are going to be a set of issues that are unique to each individual country. So what we’re got to do is to develop a structure that recognises that complexity - given its Australia, New Zealand and 14 other countries, negotiating this, this will be very complex.
So we don’t want to put a time limit on it. But what we do want do is to commence the process because if we keep putting off the commencement, then we’ll be still talking conceptionally for years to come. I think that there is a huge opportunity in the region. We are committed to ensuring that ‘plus’ in PACER-Plus has real substance. We want to be creative in developing the aid component to really facilitate the ability for the island nations to take greater advantage of the growing world trade volumes. We’re got a long way to go, but unless we begin, we won’t get to the end of the road.
Cherelle Jackson:And finally, economic benefits service liberalisation for low income consumers, and the positive income effects are well documented by reports by AusAID, and of course, by the region. But has consideration been given to sustainable poverty reduction mechanism for those who maybe end-up bearing the brunt of possible tax increases and possible increases in costs of basic services? For instance, people out in the rural areas.
Mr Crean:I think that poverty alleviation is a vital component of AusAID’s work. In any event, what we’re talking about here is the other component and that’s the ‘aid for trade’. The best mechanism for lifting people out of poverty is generating economic growth and spreading the benefits of that growth - spreading it either in terms of increased job opportunities, which increasingly won’t happen unless you skill the workforce, hence you got to put money into facility such as this [the APTC]. But also if you build the revenue base of the country through growth, its ability to deliver the services that you talked about is significantly enhanced. That’s the win-win outcome. That is the ability to assist countries generate their own level of economic activity that helps them move much more effectively out of poverty.
Cherelle Jackson:Excellent. Thank you very much. I would like to compliment you again on your very nice green shirt and your lovely ‘ula’. Perhaps just to end this, what have been your impressions of Samoa so far - without talking trade - just the country itself? OK, disregarding the very bad weather.
Mr Crean:I actually like the weather. I actually like tropical rain, especially when it’s on tin roof, but that is because we’ve been missing it so much in Australia. But it’s a lovely country. Flying into it this morning - seeing it from the ground - the thing that strikes me most of all about it is the greenness, the lushness of the country. But so to the warmth of the hospitality and reception. Miss Samoa was out there to meet us at the airport today. This inspired me to get into this shirt and fly the Aussie colours. If Samoa can put up Miss Samoa, we can fly the colours, especially with the Socceroos’ win the other night.
Cherelle Jackson:Congratulations on that by the way.
Mr Crean:Thank you very much.
Cherelle Jackson:Thank you very much for your time today.
Mr Crean:A pleasure Cherelle.
[ENDS]
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