How Australia Can Unleash Its Own “Brussels Effect” in the Pacific Island Region

“There is much that Australia . . . could learn from the political logic of early European integration for tackling the [Pacific] region’s unique climate, economic and geopolitical challenges.”

THE PROBLEM: Hardly a week goes by without a new initiative by Australia in the Pacific island region – involving more aid, more loans or more defence cooperation. Much of this effort is to beat China at its own game, responding to Beijing’s “trade plus security” overtures with a blend of infrastructure, budget support and upgraded security arrangements. But increased aid and defence diplomacy can only go so far and will not change the fundamentals of a bidding war with China for the loyalty of Pacific island countries. Many continue to have every incentive to play the powers off against each other in a transactional manner.

Canberra policymakers often appear unable or unwilling to answer an essential question: what is the long-run strategy to break the wicked problem of playing “whack-­a-­mole” with China across the region?

The most compelling answer to encroaching Chinese influence is by changing the rules of engagement through an Australian policy that builds durable regional integration – one that would enmesh Pacific island countries, Australia and New Zealand into an EU-style project. That aspiration is not new and has led to false starts in the past.

But Australia has many cards left unplayed. It is formally a part of many Pacific regional processes and by far the largest member of the Pacific Islands Forum (PIF). Just as Germany has powered European integration while leading from behind on European diplomacy, so too could Australia for the Pacific island region.

European unity owes much to the strategic choices of France and Germany in the 1950s. They elected to remedy centuries of conflict on the European continent by radically technocratic means. The European project started with the creation of the European Coal and Steel Community in 1951, which pooled resources and infrastructure vital to industry and war. Integration in one sector then led to a “spillover” of technical cooperation in other policy areas. Another powerful catalyst of European integration was open borders, which allowed for the formation of something closer to a European identity among everyday citizens.

In the Pacific, too, necessity must be the mother of invention. Pacific island countries face a human-­made calamity like no other in the form of climate change and rising sea levels, compounded by stagnant development, geographic fragmentation and the often corrosive influence of geopolitics on weak governance.

The region’s collective ability to cope with this mix of circumstances is hampered by strict border policies restricting the movement of people and wealth, few economic complementarities among small island states, poor regulatory, financial and communications infrastructure, and inadequate and costly channels for overseas Pacific labourers sending money home – a critical source of Pacific household and national income.

There is much that Australia and New Zealand, the two most powerful PIF states, could learn from the political logic of early European integration for tackling the region’s unique climate, economic and geopolitical challenges.

THE PROPOSAL: Australia has a unique ability to unleash its own “Brussels effect” in the Pacific, shaping the region through little more than its market size and regulatory standards. This would require that it commit to – and progressively ease barriers on – the free movement of data, capital and people across the Blue Pacific Continent. 

Australia should lead on two PIF–endorsed initiatives: the creation of a digital single market for the Pacific, and a phased expansion of the Trans-­Tasman ­free travel area.

What coal and steel were to Europe in the 1950s, technology and telecommunications are to the Pacific today – at once a vector of geopolitical competition and a possible solution for it. Australia, New Zealand and their Pacific partners would have much to gain from pooling their telecommunication sectors to bridge the region’s great digital divide.

A digital single market could help set supranational standards for secure and trustworthy digital infrastructure and services, and promote greater market access, competition and efficiencies through a common regulatory framework. But its ultimate aim would be to collapse geographic barriers by drastically lowering the costs of cross-­border transfers of data and capital.

One way to do this is through a Pacific-­wide framework for secure electronic identification (eID) and cashless payments. A Pacific eID system linked to a digital remittances app is needed to overhaul some of the world’s highest transaction fees for sending remittances from Australia and New Zealand to Pacific island countries. This would be an investment in the financial infrastructure of the region and significantly boost national incomes. Initially targeted at Pacific labourers overseas and their families at home, the wider rollout of a common eID for all Pacific citizens would transform remote communities: from enabling online access to government services to participation in the formal and international banking sector.

An integrated digital market would also make it easier to end roaming charges for calls, text messages and accessing the internet for users from one PIF country travelling to or residing in another. This should begin by capping the wholesale rates that networks can charge each other to allow their subscribers access to their networks. Such an initiative would be a tangible demonstration of the benefits of belonging to one Pacific family, not least for the hundreds of thousands of tourists from Australia and New Zealand who visit Pacific island countries every year.

A shared digital ecosystem would pave the way for the most significant form of PIF integration possible: an EU-­style common travel area for the Pacific. This may seem a distant reality, but a de facto one already exists in the form of the Trans-­Tasman Travel Arrangement, which allows the nationals of a quarter of the PIF’s member states – Australia, New Zealand, Cook Islands, Niue and Tokelau (a PIF associate member) – to  live, work and study across each other’s borders.

In the Pacific, the backbone of integration will be the movement of people rather than intra-­regional trade. Australia has shown new willingness to experiment on this front, including through a Pacific Engagement Visa and, far more significantly, by announcing a world-­first climate mobility treaty with Tuvalu. The Falepili Union – allowing a small number of Tuvaluans, chosen by ballot, to be accepted as permanent residents in Australia per year – opens the doors for a more ambitious multilateral innovation. 

Much as five European countries forged the Schengen Agreement of 1985, Australia and New Zealand – together with the three other PIF countries involved in the Trans-­Tasman corridor – could merge several arrangements into one by establishing a treaty for the creation and expansion of a Pacific common travel area. Such an initiative would, like the Schengen Area, incentivise reforms in applicant states to allow for the lifting of restrictions on cross-­border travel. Accession to the common travel area would be based on a set of criteria tailored to the region, including:

a) the integrity and security of an applicant state’s border, immigration and citizenship controls; and

b) the compatibility of governance and economic standards in applicant states with those of existing members, particularly in terms of institutional stability, rule of law, and a requisite capacity to minimise brain drain.

Based on these conditions, the most developed economies in the Pacific, such as Fiji, would be first in the queue to join. However, full accession would also require that:

c) applicant states open their own quota-­based “climate mobility” pathways allowing nationals of the most climate-­vulnerable Pacific islands to settle on their shores.

A common travel area would demonstrate solidarity on two levels: Australia and New Zealand would be lifting barriers for citizens of the best-­governed countries in the region, while the most resilient countries would be extending lifelines towards citizens of the most climate-­vulnerable.

WHY IT WILL WORK: If history is any guide, change across the region will not first come from attempts at political and security assimilation, premised on the “strategic denial” of China’s influence, but rather from horizontal integration: by removing barriers on the movement of data, capital and people.

The expansion of these “three freedoms”, branching out from a nucleus of countries, has the potential to unite all Pacific island states in a common direction of travel, albeit at different speeds. 

A digital single market and a common travel area for the Pacific would represent by far the most innovative forms of regional integration ever attempted, with the potential to boost national incomes through increased labour mobility and remittance flows, advance the region’s collective response to climate change, and spur reforms that would strengthen government capacity and regional security.

Applying the logic of European integration to the Pacific island region is not the same as calling for a “Pacific EU”.  Australia is fortunate that a regional body and a Pacific-defined vision for a Blue Pacific Continent already exists to underpin these projects. It would be up to the member states collectively to decide the form of future political arrangements between them. It is conceivable that the grouping of island countries settles for a more decentralised union sustained principally by intergovernmental treaties, rather than bodies such as the European Commission.

Either way, the effects for Australia would be game-­changing. Canberra would essentially acquire the EU’s most powerful tool of foreign policy – its enlargement policy – for reshaping the dynamics of the region without the need to impose restrictions on the sovereignty of Pacific island countries.

The promise of two-way integration with a country representing more than 80 per cent of the PIF economy would make Pacific island governments more resistant to the risk of top-­down elite capture. Opting out of these transformative regional ventures would raise the political stakes and narrow the choices available to any government wishing to play geopolitics at the expense of their people’s future.

The greatest challenge to unlocking durable integration in the Pacific is not China but domestic political constraints in Australia. Its political class will need to forcefully convey to voters the strategic urgency and economic dividends of bringing the Pacific family together in unprecedented ways. As Brexit illustrated, projects of this nature rarely end well without the social licence to propel them forward.