(By Nic Maclellan, reporting from Auckland)

This week’s meeting of the Pacific Islands Forum in Auckland faces a dispute over the mandate and independence of the Office of the Chief Trade Advisor (OCTA), which advises Forum Island countries in their trade negotiations with Australia and New Zealand.

For governments in Canberra and Wellington, trade negotiations are a central plank in their relations with the island states of the Pacific. But as leaders gather in Auckland there are serious obstacles to regional trade talks, including the resignation of Chief Trade Advisor Chris Noonan, allegations of Australian bullying over OCTA’s funding and a recommendation from Forum officials that leaders reject OCTA’s bid for observer status with the Forum.

The OCTA crisis comes at the same time as political developments in Fiji complicate trade policy for the regional organisation.

Any serious move to promote regional economic integration must take account of Fiji’s geographic and economic role in the region. But while Fiji remains a member of the 16-member Pacific Islands Forum, the government headed by Commodore Voreqe Bainimarama is suspended from all Forum meetings and activities – including trade negotiations for the regional free trade agreement known as PACER-Plus.

Crisis over the OCTA

Given the imbalance of resources between small island states and Australia and New Zealand, island governments have long relied on independent advice and technical support for trade talks. For the Forum island countries, the establishment and funding of the Office of the Chief Trade Advisor (OCTA) was a precondition for the commencement of PACER-Plus negotiations with Australia and New Zealand.

New Zealand trade academic Chris Noonan was appointed as Chief Trade Advisor at the 2009 Forum leaders meeting in Cairns - but citing “purely personal” reasons, Noonan has just announced his resignation, to take effect this week.

His departure comes at a time when the regional trade talks are facing multiple and serious crises. This includes damaging reports of Australian attempts to control the mandate and governance of the OCTA, which is currently housed at the Melanesian Spearhead Group Secretariat in Port Vila (a reflection of the importance of trade policy for the larger Melanesian countries).

The OCTA Governing Board has seven members who are ministers and senior trade officials selected from the Forum island countries, but OCTA is reliant on funding from Australia and New Zealand.

The agreement to commence negotiations on PACER-Plus included a commitment by Australia and New Zealand to provide funding for OCTA of A$500,000 and NZ$650,000 each year, over three years. Canberra and Wellington provided the first tranche of funding, but that initial grant ran out in March 2011. OCTA rolled over the remaining funds beyond this deadline, but needs renewed and ongoing commitments from the two largest Forum members.

In August, New Zealand formally signed an agreement for ongoing funding, but Australia has yet to sign a new deal. Canberra’s latest draft, issued last week, requires a range of changes from OCTA before guaranteeing ongoing funding, including quarterly reports, a sole focus on PACER-Plus and other pre-conditions.

Australian attempts to tie funding to changes to OCTA’s governance and operations are causing criticism at home and anxiety amongst Forum island countries.

Newly elected Senator Lee Rhiannon of the Australian Greens has challenged the Gillard government in Parliament, raising concerns about OCTA’s independence after this year’s Forum Trade Ministers Meeting.

In a speech to the Senate last month, Rhiannon stated: “Australia went as far as to insist that the OCTA constitution limit it to only PACER-Plus matters and that Australia have the ability to influence amendments to the constitution through decisions made by Forum leaders and trade ministers meetings. This was rightly rejected by the Forum island countries. Failing this, Australia has offered the OCTA a funding agreement that has been called unworkable. Primarily this is due to Australia's condition that the OCTA only work on PACER Plus and undergo quarterly reviews where the funding could be terminated.”

Parliamentary Secretary for Pacific Island Affairs Richard Marles rejects criticism of Australian bullying, stating: “I'm confident that in the not too distant future, we will have reached an agreement and that will be done in a very normal and usual way and there are no strong arm tactics at all.”

Beyond the trade talks with Australia and New Zealand, there is also a push led by Papua New Guinea to give OCTA the responsibility for trade negotiations with the European Union, in place of the Suva-based Forum Secretariat.

Dr. Noonan has expressed concerned that Canberra is trying to limit OCTA’s mandate to PACER-Plus and not other trade agreements like the EU-PACP Economic Partnership Agreement (EPA). Last week he told Radio Australia: “Effectively, what Australia seems to be saying is that the countries have to get their advice on that trade negotiation from the Forum Secretariat. It’s taking away, effectively, the sovereign right of each country to decide where they should get their advice from on trade matters.”

Since the Chief Trade Advisor’s appointment, there have been tensions between OCTA and Secretariat staff responsible for trade policy. An interim arrangement between the Forum Secretariat and the OCTA expired on 28 March 2011 and OCTA has obtained status as a legal entity in Vanuatu.

But the ongoing disputes over OCTA’s role will continue this week, as regional leaders decide on the involvement of new players in Forum affairs.

The regional organisation is currently expanding the number of observers who can attend Forum meetings, with the ACP group and the remaining US territories (Guam, American Samoa and the Commonwealth of the Northern Marianas) all being recommended for observer status this year.

OCTA does not yet have observer status, although a number of multilateral organisations – including the World Bank, Asian Development Bank, the Commonwealth and all nine members of the Council of Regional Organisations of the Pacific – have been granted that right.

This anomaly looks like it will continue. At their August meeting in Suva, the Forum Officials Committee formally agreed that they “declined to refer to Leaders the request for Forum observer status for the OCTA.”

Fiji still isolated on trade

The regional trade negotiations are further complicated by the Forum’s dispute with the Bainimarama regime in Fiji.

After Papua New Guinea, Fiji is the second largest economy in the islands region and serves as a major transport, communications and services hub. But Fiji has been absent from the PACER-Plus talks after the Bainimarama government was suspended from Forum meetings in 2009.

The Forum has been unable to resolve Suva’s claim that it has rights as a member of the 2001 Pacific Agreement on Closer Economic Relations (PACER), with Australian ministers and officials asserting that PACER-Plus is separate from the 2001 agreement to which Fiji is a signatory.

Today, the legal niceties have been drowned by a chorus of voices calling for changes in the Forum’s engagement with Fiji. Business leaders met in Fiji last June and stated “the exclusion of Fiji from the negotiating process so far has created confusion in the region about the relevance of a regional economic agreement negotiation without Fiji economic and business interests being fully represented.”

At the 2010 Forum in Port Vila, Forum leaders tasked the Fiji–Forum Ministerial Contact Group “to consider possible modalities for engaging Fiji in PACER-Plus negotiations and to circulate their findings to Leaders for consideration before the next Forum.”

However the Ministerial Contact Group couldn’t travel to Fiji as scheduled because of the ongoing dispute with the Bainimarama government, and this week’s meeting in Auckland will find it hard to resolve the gulf with Suva.

Australian engagement?

Earlier this year, Australian Trade Minister Craig Emerson announced the Gillard government’s new international trade policy Trading our way to more jobs and prosperity.

A striking feature of the new policy is that PACER-Plus is not even mentioned, even though regional trade reform has been a pillar of Australia’s engagement with the islands region since the late 1990s under the Howard, Rudd and Gillard governments.

Emerson didn’t attend this year’s Forum Trade Ministers Meeting, leaving regional negotiations in the hands of Parliamentary Secretary for the Pacific Island Affairs Richard Marles.

Pacific trade advocacy groups have presented Emerson’s absence as a sign that Australia’s regional trade policy is drifting, although Marles has rejected the criticism, arguing that Australia remains “absolutely committed” to the PACER-Plus negotiations.

However the latest dispute over OCTA will further complicate the progress of trade talks and the absence of Cabinet-level engagement on Pacific trade policy from both Emerson and Foreign Minister Rudd has raised concern in the region.

Chris Noonan has argued: “There is a need for Australia and New Zealand to decide what to put on the table. At the moment, there is really nothing of value for the Forum Island countries.”

PACER-Plus is in trouble and Prime Minister Julia Gillard has a busy week ahead of her in Auckland.