The APEC hook: Small fish in a big ocean (Part 2)

The following story is the second of a three-part series examining the impact of APEC on Hawaii and the Pacific region. The author, Arnie Saiki, is a researcher and the project director for Statehood Hawaii/ImiPono Projects, an independent and nonprofit website promoting open public dialogue on the issue of Hawaii’s statehood.

To read “The APEC hook: When the shark guards the tuna (Part 1),” click here

To read “The APEC hook: Hawaii bites (Part 3),” click here

HONOLULU—As smaller island nations in the Pacific attempt to forge their futures in the global economy, short-term negotiations will have a drastic impact on the long-term future of their local economies, their environment, and their resources.

The 2005 “Pacific Plan,” endorsed by Leaders at the Pacific Island Forum, created a roadmap for Pacific Island nations to enhance and stimulate economic growth, sustainable development, good governance, and security for Pacific countries through regionalism—countries working together for their joint and individual benefit. This plan advocated for the needs of the Small Island Developing States, contrasting against the unbalanced regional economic integration that the larger economies of Australia and New Zealand would gain through agreements like The Pacific Agreement on Closer Economic Relations (PACER) and The Pacific Island Countries Trade Agreement (PICTA).

This small island Pacific regionalism described in the Pacific Plan was meant to strengthen cooperation by small island developing states in the various trade sectors, and to also provide consensus against the realities of climate change.

In 2010, U.S. Assistant Secretary of State Kurt Campbell reiterated the objectives of the Pacific Plan during his address on U.S. Policy in the Pacific Islands in 2010 before the House Committee on Foreign Affairs on Asia, the Pacific, and the Global Environment. Further, Campbell expanded upon the Pacific Plan by identifying the role of the United States as a military “Pacific power” and called for enhancing the work of the Secretariat of the Pacific Community (SPC), a 26-member regional organization in the Pacific that includes the U.S. territories of American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.

Campbell testified: “Working with the SPC gives the United States the opportunity to standardize climate change policies ... and is a natural partner to advance U.S. and regional agendas in climate change, energy security, ... and other priority sectors.”

Secretary of State Hillary Clinton has also called strongly for U.S.-led leadership backed by a growing military presence in the Pacific.

In a January 2010 speech at the East West Center in Honolulu, Clinton stated: “We start from a simple premise. America’s future is linked to the future of the Asia-Pacific region; and the future of this region depends on America. The United States has a strong interest in continuing its tradition of economic and strategic leadership, and Asia has a strong interest in the United States remaining a dynamic economic partner and a stabilizing military influence.”

Clinton articulated five principles of America’s continued engagement and leadership in the Pacific: 

1. Using the United States’ bilateral alliance relationships as the cornerstone of regional involvement 
while pursuing other partnerships and dialogues with regional players.
2. Shaping regional institutions to advance shared objectives such as economic development and democracy.
3. Ensuring that regional 
institutions are effective and results-oriented. 
4. Maintaining flexibility in pursuing objectives, including through sub-regional 
5. Determining which Asia-Pacific regional institutions 
are the defining ones that include all key stakeholders.

“We are applying these principles in strengthening our ties with our Pacific 
Island partners in both multilateral and bilateral arenas,” Clinton said, emphasizing the crucial role of the Pacific Island Forum. She added: “These closer relations between the United States and Pacific Islands can be further seen in recent meetings where the U.S. territories—Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands—have all been granted the opportunity by the United States to apply for observer status in the Pacific Forum.”

When one accounts for Pacific Island resources, its land, peoples, cultures, shipping lanes and Exclusive Economic Zones, if managed or stewarded with sustainable environmental regulations, the Pacific Islands could be influential international players within the global economy, spurring both alternative economic growth as well as environmental security.

To say that APEC will provide environmental security or will provide for sustainable management of resources is like saying the shark will guard the tuna.

APEC, however, founded upon the principle of neo-liberal free market and free trade, is incapable of embracing any alternative economic system. To say that APEC will provide environmental security or will provide for sustainable management of resources is like saying the shark will guard the tuna.

From an investment standpoint, new deep-sea mining technologies have already begun to alter the economic seascape of Pacific Islands. With deep sea mining already underway in Papua New Guinea, and new lease mining agreements having already been signed with the Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Palau, Samoa, Solomon Islands, Timor Leste, Tonga, Tuvalu, and Vanuatu, the investment regime is quickly acting to control the management of these resources.

Maureen Penjueli, co-ordinator of Fiji-based Pacific Network on Globalisation, said she was “deeply concerned” by the economic model being used to promote the industry.

“Putting aside the considerable environmental concerns for a moment, economically this may not be smart either,” Penjueli said. “For instance, mining the ocean could severely compromise our fisheries industries, so we need to think very, very carefully about what is intrinsically good for our nations.”

In July 2011, The International Seabed Authority (ISA) approved the plans of work for exploration for polymetallic nodules and polymetallic sulphides in the international deep seabed area.

There are already several deep-sea mining companies from Canada (Nautilus Minerals), Australia (Blue Water Metals), and the United States (Neptune Minerals) negotiating agreements with Pacific Island nations. The mining and depletion of these new mineral resources will be a boon for the larger economic powers. Companies like Endeavor Mining, who, in exchange for mineral and mining rights to the seabed resources, recently presented Cook Island Cabinet Ministers with a partnership proposal worth a total investment of $1 billion over three-and-a-half years. Considering that the Cook Islands total GDP in 2007 was around $280 million, these kinds of investment packages in the Pacific Islands will be difficult to resist.

Typically, since Endeavor is also an independent merchant banking company focusing on the global natural resources sector, they will likely offer investors the standard five-year hedge that will include a package of financial incentive benefits that will reward investors for parting with their capital for five-years, at whatever the cost to island peoples and resources. The nature of the finance industry is profit, and if islands do not yield the kind of results that will provide a $1 billion-plus return to investors, island governments (taxpayers) will be liable for losses. In order to ensure a $1 billion return to investors, a tremendous amount of deregulation will have to occur.

If these International Investment Agreements are standard to the 14 small island nations having already signed lease agreements with transnational mining companies, this may already have amounted to a $14 billion international investment in deep sea mining by various transnational holding companies potentially adding to what could amount to nearly half the total GDP of Pacific Island nations, which in 2007 was about $26 billion.

As a result of signing such an agreement, it is possible that after five-years the Cook Islands will not only have degraded their environment, but they will also be in debt. Additionally, to qualify for loans to pay back this debt, austerity measures will forcibly be applied to open the doors to further deregulations, and upon meeting these imposed structural adjustments, the Cook Islands will be well on their way in a race to the bottom.

Usually, investors are cautious to risk their money in projects where infrastructure and security are lax. However, with the United States having stronger participation in the security of the Pacific and the seduction of these new mining technologies creating new opportunities for asset wealth, Pacific Islands need to create and organize a formal and strong regulation block against this kind of investor greed.

Pacific Islands need to create and organize a formal and strong regulation block against this kind of investor greed.

Beyond the Exclusive Economic Zones, other companies like DeepGreen Resources, as well as the Chinese government have just lodged applications to mine for minerals under the seabed in international waters.

The quantity of gold, silver, copper, nickel, magnesium, REMs, etc. located in the deep sea are unknown, although recent studies are already stimulating a speculation free-for-all. And with liberalizing regulations, the results of deep sea mining could send the value of commodity assets spiraling into the unknown as quantities of commodity assets become managed by the large economic powers.

For the security of Pacific Islands, mining needs to be heavily regulated with a clear blueprint of the environmental impact of how this new mining technology will environmentally degrade and deplete reef systems and fisheries. 

In 2008, Nautilus Minerals published an Environmental Impact Statement for their deep sea Solwara 1 mining project in Papua New Guinea. All that the study shows is that long-term damages remain inconclusive.

Again, the most challenging problem for Pacific Islands is the loss of environmental protections, and as climate change is significantly altering the sustainability of drinking water and food security, mining in the deep-sea will only further degrade environments by jeopardizing fisheries and the bio-diversity of reef systems that are absolutely essential to the sustainability or our planet.

Previous to this new “Pacific Gold Rush,” Pacific Islands mostly depended on development and aid to raise the economic standards of its people. As investments in fisheries or tourism created some revenue stream to the islands providing for some income and stability, the majority of the profits left the islands, along with the tourists and the commodity resources, and back into the pockets of investors and corporations.

Generally, Pacific Islands had a difficult time attracting international investment because they lacked two essentials: infrastructure and security. Investors were not keen on putting their money into the building of infrastructure or into ventures where their investments were not protected (either by banks or by the military).

Now with the United States growing closer economic relations with the Pacific Island Forum, these two essentials are taken care of. For the United States this is a win-win-win opportunity as stated in Clinton’s Pacific plans. The United States can not only help to build the economic infrastructure to prepare for new industries, but they can provide military security over investments while maintaining its security agenda in the Pacific.

In Papua New Guinea for example, in the government’s own APEC Investment Guide, it states that the government is “removing barriers that impede trade and investment in the country and that substantial progress has been made in removing impediments to business.” For small island nations, trade barriers and investment regulations are necessary to protect not only the bio-diversity of small environments, but also traditional local markets. Subsidized public utilities and health care, for example, should not be forced to compete in the free market in island communities without subsidization because local production will always be at a disadvantage of the transnational investment regime.

For small island nations, trade barriers and investment regulations are necessary to protect not only the bio-diversity of small environments, but also traditional local markets.

For the mining sector, the Papua New Guinea investment guidelines clearly state: “Foreigners may own 100 percent of equity, however, if the government of Papua New Guinea participates, it can take equity up to a maximum of 30 percent in mining. In all cases, if the government does not participate, the foreign company takes up to 100 percent equity of which 2 percent will be negotiated for the landowner benefits.” 

Papua New Guinea is the most resource rich of Pacific islands and, as a member of APEC, has greater negotiating power than small islands.

If this is the best that Papua New Guinea can do to protect its resources, then how can the much smaller Pacific islands hang on to its resources, or at the very least negotiate better terms for sacrificing their fragile environments.

Also, as islands such as Tuvalu and Kiribati cease to be no longer life-sustaining as a result of the rising tides, migrating peoples will become environmental refugees as they enter other countries. As refugees, they will not have the same rights or opportunities as the citizens of those countries or as refugees as a result of war despite similar devastation in their home countries.

Knowing in advance that one’s country is quickly being submerged, the giving away of one’s territorial assets to transnational mining companies and their stake holders is a very precarious situation to be in. Consider that if Pacific Island Countries owned 98 percent (rather than 2 percent) of their national wealth. At the very least, migrating islanders will have real equity when forced to migrate, rather than be refugees and wards of a state.

APEC and the investment regimes enforce competition. Through international trade law, governments sign away their rights to “nationalize” industries or to give advantages to a company that might be publicly owned by its citizenry. Pacific Islands also do not have the technological or financial capacity to compete with transnational investments in mining.

For Pacific Islands, a short-term windfall may seem attractive, but the long-term losses are irretrievable. The investment regime is the hook that will eat both shark and tuna.

Stay tuned for further analysis of APEC’s impact on Hawaii and the Pacific region in Part 3 of “The APEC Hook” by Arnie Saiki at The Hawaii Independent.

EDITOR’S NOTE: At 1:24 p.m. on Friday, October 21, further information was added about the GDP for the Cook Islands the GDP of Pacific Island nations.