Chapter 3 - Labour from the South
Introduction to Australia in the South Pacific region
Small Pacific states have been identified as a suitable and likely
source of temporary labour for Australia in the event that any such scheme was
agreed to. This chapter looks at Australia's place in the South Pacific and
explores some of the characteristics of the region that are relevant to a
temporary harvest labour scheme proposal.
Proponents of a harvest labour scheme, like the National Farmers'
Federation, see countries which are aid recipients as preferred sources of
labour, with the South Pacific states being the most obvious choice because of
the relatively close cultural affinity with Australians. The Core Group
Recommendation Report (Core Group Report) for a White Paper on Australia's aid
program suggested the option of opening a 'Pacific Window' for unskilled
temporary migration, similar to that of New Zealand.
The Core Group Report resulted from the deliberations of three experts on aid,
charged with outlining a medium-term strategic framework for the delivery of
aid. The core group's report, published in December 2005, was the product of
extensive consultations with government, those engaged in aid delivery, and
with the public. Most proponents who submitted to this inquiry emphasised the
importance of reciprocal benefit, which would occur most obviously with Pacific
labour, and not at all in the case, for instance, of Chinese labour. Any scheme
which eventually results would be seen not simply as a labour supply measure
benefiting the Australian economy, but as a regulated instrument of Pacific
Australian aid in the Pacific
The Core Group Report contains an extract from the 2003 Department of
Foreign Affairs and Trade (DFAT) White Paper giving an overview of why the
Pacific region is important to Australia. In part, the White Paper reports that:
History has tied Australia intimately to the nations and people
of the South Pacific. Australia helped to shape some of the island states as
they became independent – their economic bases, power-sharing arrangements
between the centre and the provinces, and philosophy of governance. And in some
cases we passed on our institutions and ideas underpinning them –
constitutions, parliaments, public services, legal systems, and security forces
The Core Group Report goes on to discuss the continuing diplomatic and
security reasons for Australia to increase its influence in the region. They
include the withdrawal of former imperial powers from the region, and the
tensions created by the more recent and economic influence of China, Taiwan and
Malaysia. It is argued that Australia needs to assert a leadership role in
the region and give explicit recognition that regional economic and social stability
is essential to Australian interests.
For all these reasons, Australia plays a significant aid donor role in
the South Pacific. Of the approximately $2.5 billion allocated to aid in the
2005-06 budget, about $950 million was allocated to Papua New Guinea and other Pacific
countries. It is clear that assisting Pacific region states to achieve their
development goals has been a challenge, and that while economic growth in the
region has been slower than hoped for, Australia is committed to giving aid over
Australia's position in relation to the Pacific is confirmed in another White
Paper, this time on the future of Australian aid:
Australian aid to the Pacific will continue to operate within
very long timeframes. Change will be slow and incremental, and Pacific partner
governments will be set up to fail if demands for reform and progress are
framed merely in the short term. The Government remains committed to working
with its Pacific partners in support of their own sustained reform agendas and
will not walk away with the job partly done. However, governments in the region
should not expect that Australia will simply continue to provide unlimited
assistance. Australia will help, but the Pacific island governments must face
and tackle poor governance and corruption. And they must do so urgently.
The future of the Pacific, the group concluded, hinged on its
integration with the global economy. In relation to the issue of labour
migration and its connection with the provision of foreign aid, the core group submitted
that although by no means a panacea, part of the integration solution is
migration. Indeed, migration was the only route to viability for Pacific
micro-states. The core group supported the Government's intention to help
establish a regional technical training facility to provide greater
opportunities for skilled migration and urged consideration of opportunities
for unskilled migration as well.
In the 2006 White Paper, the Government took up many of the points made
by the Core Group Report, giving support for increased labour mobility, and for
training schemes to increase employment both domestically and abroad.
But the White Paper ignored references in the Core Group Report to mobility of
unskilled labour. The White Paper does not explain the Government's decision
not to pick up on the core group's recommendation, but the committee presumes
that to do so would invite a domestic argument over a foreign policy issue,
which would be regarded as being undesirable and potentially damaging to
relations with the South Pacific region.
Current labour migration in the
Pacific workers are highly mobile. Maclellan and Mares point out that
i-Kiribati and Tuvaluan workers crew large numbers of ships on the main trade
routes, and that many construction workers in Australia and New Zealand are of
Tongan or Samoan birth. More than one thousand Fijians work in Iraq and Kuwait
in security roles. Skilled Indo-Fijians and Tongans routinely leave their
homelands in search of lucrative jobs abroad.
A significant proportion of Polynesian and Melanesian labourers now live in
mainland centres around the Pacific Rim, while in smaller islands such as Niue,
Cook Islands, Wallis and Futuna, and Rotuma, the number of citizens living
outside the country is greater than the number who remain. The Asian
Development Bank points out that Pacific Islanders constitute 2.4 per cent of Australia's
population, and that in 2001, the immigrant population residing in Australia
and New Zealand from the Cook Islands represented 96.9 per cent of the total
Migration rights carried over from former imperial times make this possible.
Migration in the Pacific is not solely an international phenomenon.
Urban migration within countries is also common, although this is often a precursor
to migration off-shore. Pacific islands are faced with many of the same
challenges seen in Australia through urban migration, where the concentration
of people and money leaves rural areas with fewer services, and increasingly
unattractive as places to live, while the housing and infrastructure in urban
centres is strained by the pressure of a swollen population.
Potential source countries: a
Central to the Australian aid strategy is the shoring up of stable
governance and the generation of economic growth in recipient countries. This
is vital for national and regional stability through development of a
productive workforce, and for the integration of Pacific states into the global
economy. As a general proposition, Pacific island states face serious
challenges in relation to achieving these goals. They lack natural resources, and
are dependent on revenue from tourism and aid. Thus, Pacific economies are
vulnerable. Circumstances are made worse by widespread corruption, lawlessness
and disorder. The outlook for many Pacific states, and in particular the
so-called micro-states such as Nauru, is bleak.
This is acknowledged by Pacific states. As noted in the report of the
2003 Senate inquiry into Australia's engagement in the region:
Economic security is very much a concern of the countries in the
region. Given the extent to which economic security is linked to both internal
political stability and the global economy, a number of countries in the region
have an acute awareness of their fragility and vulnerability. Much of the
evidence presented to the committee raised concerns for the current state of
many of the economies of the Pacific and many submissions argued that
countries such as Papua New Guinea (PNG), Nauru and the Solomon Islands are
confronting a worse economic and social outlook in 2003 than they were at
In its report, the Asian Development Bank provided a sobering description
of the current situation and likely future of small Pacific states. While
acknowledging that variation exists between states, it stated that:
...[T]ypically they are small isolated communities, endowed with
few natural resources, comprising of many smaller islands and atolls which
often suffer from a lack of geographical proximity to one another. A direct
result of this isolation is that a disproportionate share of total income is
spent on communication, administration and transport. A narrow production base
exacerbated by the declining terms of trade in Pacific island agricultural
commodities, failures to successfully diversify economically, significant
diseconomies of scale (due to incredibly small domestic markets), and an
inability to compete effectively in the global marketplace, have resulted in
large trade deficits.
The Pacific island nations are amongst some of the smallest and poorest
in the world, but a number are experiencing significant statistical 'bulges' in
the proportion of their population comprised by youth. More than 50 per cent of
the population of some Pacific states is aged less than 15 years.
The Core Group Companion Volume Report noted that:
All Pacific Island Countries have relatively high fertility
rates and therefore have large cohorts of young people. In countries
experiencing strong investment growth, a large supply of youthful labour can
provide a demographic bonus, as experienced in East and South East Asia.
However, when investment is not growing strongly, the youth bulge can be a
problem, including through contributing to political instability. Large numbers
of young unemployed male youth in urban areas can be an ingredient for
political instability by providing by providing the manpower for those keen to
ferment civil unrest.
Given the young and growing populations in most island nations, the issue
of employment generation will become increasingly urgent in the Pacific in
coming decades. Pacific island fertility rates have declined since the 1980s,
but not fast enough to reduce the demand for jobs in the cash economy. Except
for the French territories of New Caledonia and French Polynesia, none of the
Pacific island countries will reduce their total fertility rate to less than
2.1 per cent by 2029.
Remittances keep many economies afloat. The World Bank reports that
global recordable remittances were expected to reach $167 billion by 2005, but
that at least another 50 per cent of this amount flows through informal
channels. This is more than double the amount which flows between countries in
the form of international aid, and has doubled in the past five years.
More recent studies by The World Bank show that remittances are about three
times all official development assistance, and unlike other sources of revenue
they do not dry up.
South Pacific countries are a case in point. States such as Tonga, Samoa,
Kiribati, Tuvalu and the Cook Islands look to remittances to supplement income
from foreign aid, and to alleviate the difficulty many have in attracting significant
foreign investment. The committee was told that remittances have turned Tonga
into what is virtually an international economy, to the extent that the
majority of its population lives abroad and most families at home are in
receipt of remittances.
It is not only in very small countries that remittances form a
cornerstone of the local economy. Fiji already earns more from remittances than
from any other sector except tourism, and when unrecorded remittances are
accounted for, remittances might be Fiji's biggest source of foreign income. An
estimated 40 per cent of Fijian households receive income from remittances. Of
more than F$306 (AUD$234) million of remittances earned in 2004, about F$200
(AUD$153) million came from the salaries and allowances of Fijians working abroad.
In Fiji, as in other places, a substantial proportion of remitted income is
transmitted in cash and goes unrecorded.
The recent World Bank report found that remittances reduce the incidence
and severity of poverty; increasing incomes, and levelling peaks and troughs in
income in times of adversities like crop failure. Diversifying income streams
reduces risk to vulnerable people on low incomes, and provides a source of
savings for investment in capital.
The committee also heard that remittances can have the effect of levelling out
income distribution. Remittances also provide macro-economic advantages. A flow
of foreign currency can improve a country's ability to borrow to fund economic
development, reducing dependence on aid, and for that matter, on remittances. These
benefits go some way toward countering arguments that an insufficient
proportion of remittances are deployed directly into investment.
There are claims that while the continuing importance of remittances is
clear, their sustainability is less so. An immigrant's integration into their
new country, and the passing of the generations, may lessen the willingness, or
compulsion, to remit earnings. While much evidence exists that first generation
migrants are likely to continue to remit, little analysis has taken place on
subsequent generations. One study, conducted by La Trobe University, suggests
that subsequent generations are unlikely to remit at the same rate as their
Such views have been disputed by an authority on remittances, who
claimed that remittances do not decline with the passage of time. As Professor Brown
People might say, ‘What happens when the parents die? They will
stop remitting.’ But they do not. They remit to the next generation down and to
organisations. The do not only remit to third parties but also to their own
pension funds. Most migrants will entertain the belief that they will one day
return for retirement, and so they want to keep a nest egg for their
retirement; they want to keep in with the community if they have to return. If
they have not been looking after the community while they have been away, they
will be rejected on their return. They invest in both social capital and
physical capital for their eventual retirement. That has become the way of life
in countries like Tonga and Samoa. That is the mode of development. To
entertain the idea of these countries industrialising I think is absolutely
The relevance of remittances in this context is that the wages that
might be paid to workers from Pacific island states is probably the best form
of aid. It ensures that assistance and maintenance goes to those who need it
from those who earn it. The benefits percolate through to the community.
The committee was interested to note in the conclusion to the submission
from DFAT the following statement:
It is possible that nett financial benefits, after costs of
travel, accommodation, insurance and living expenses, would not deliver an
increase in remittance flows. Further, the numbers of workers likely to be
needed in seasonal contract labour schemes may not make a substantial
difference to unemployment rates in Pacific island countries. Certainly such
schemes would not detract from the challenge of generating economic growth in
Pacific island countries, and the need for governments to adopt pro-growth policies.
Two pieces of evidence need to be cited in relation to the first part of
this statement. Australian Horticulture has submitted that weekly wages in the
horticulture sector are around ten times higher, at least, than wages typically
available in the Pacific islands. They are also many times higher than civil
service and professional salaries paid in those countries.
Second, Professor Brown told the committee that even individuals living on
social security in Australia have been able to remit, provided they had
extended family support.
The World Bank has stated that Pacific harvest workers could gross the
equivalent of their entire monthly income in just a few days work in Australia
at the 2005 award rate of $15.38 per hour.
In regard to the final sentence in the quoted extract, the committee's
reaction on a first hearing is that it is not aware of any suggestion that a
choice lies between the mobility of unskilled Pacific islanders and economic
growth at home. Economists have demonstrated that the two are linked. DFAT
would be aware that the World Bank considers that the prospect for economic
growth in Pacific states is 'unusually limited'.
It is possible, however, that the DFAT submission was alluding to a difference
of opinion among some development economists about institutional impediments to
economic growth that are rooted in the culture of both Polynesian and Melanesian
societies. This is the basis of Professor Helen Hughes' opposition to a harvest
labour scheme. Professor Hughes argues that while the remittance argument is
'intuitively appealing', remittances sustain a consumption society where
productive economic activity hardly exists. This happens because the absence of
private property rights reduces investment opportunities, and ensures that
remittances are claimed by clans and extended families.
The committee does not believe that such arguments loom large in underpinning
the government's objection to a harvest labour scheme, as distinct from
domestic political considerations, but it is an interesting reflection on the complexity
of making policy for dealing with the economies of Pacific states. Leaving
aside issues of Pacific island economic development, and focussing on more
immediate needs, the importance of increased remittances to Pacific island
states which would result from a harvest labour scheme appears to be obvious.
The WTO angle
The committee took some interest in an argument presented by DFAT in
which it was proposed that a policy which allowed the entry of harvest labour
exclusively from Pacific island countries would be in breach of World Trade
Organisation (WTO) rules, and would be subject to objections from other
countries. It was explained to the committee by DFAT in this way:
We are a member of the World Trade Organisation and have taken
on obligations under the General Agreement on Trade in Services [GATS], and
that agreement does have a number of provisions that impact on the temporary
movement of service providers. One of the provisions relates to most-favoured
nations. That is article II of the agreement, and it basically ensures that
members are unable to discriminate between service providers from different
countries. In that sense, under the provision, depending on just how that
scheme was structured and whether the scheme could be characterised as falling
under the General Agreement on Trade in Services—principally that would be a
movement of a person to supply a service on a temporary basis under sponsorship
or contract—I think we would have a problem.
If it was a preferential scheme which was not open to all WTO
members, then we could be in breach of our WTO obligations. ...It is when you are
having a movement of a natural person who is coming across temporarily under a
contract—and usually under some form of sponsorship arrangement—that the annex
on the movement of natural persons under the General Agreement on Trade in
Services comes into play. That kind of scheme would fall under the GATS and we
would face some problems in terms of being in violation of our most favoured
This advice was strenuously contested. There is significant legal
uncertainty about what the relevant provisions in GATS cover. The DFAT view
appears to be based on a broad interpretation of GATS Article IV, which treats
immigration as a component of trade. Another view of GATS is that immigration
is unrelated to trade, an issue which arose in the negotiations over the
Australia-United States Free Trade Agreement, when labour provisions had to be
covered in separate legislation. This more narrow view prevails in the United
States and in the European Union. On this precedent, movement of labour could
be considered as a purely immigration matter.
In its discussion of GATS, the Asian Development Bank was also of the
view that the instrument ' ... does not prohibit countries imposing stricter
regimes for visas for nationals from particular countries ...'
As Dr Luthria put it, the WTO and migration 'do not mix'.
If this analysis is accepted it is highly unlikely that the government would be
required to extend a labour entry arrangement to all WTO members. Australia, no
less than any other country, exercises its sovereign rights in regard to
migration and in accordance with its regional policies and bilateral
Even if the argument that immigration is inextricably linked to trade is
supported, there are still ways to allow Pacific island workers into Australia
under WTO rules. GATS Article V (and GATT Article XXIV for goods) allows
exemptions to Most Favoured Nation provisions for the negotiation of
preferential trade agreements. Negotiations towards a free trade
association could be undertaken with Pacific states with a view to making
exemptions for the supply of temporary labour into Australia. A
contingency harvest arrangement for services under Mode 4 could then allow near
immediate access, should it be necessary.
Dr Manjula Luthria of The World Bank explained to the committee that
GATS is an agreement covering services, and explicitly excludes agriculture,
manufacturing and services incidental to them, including harvesting. Dr Luthria
submitted that Australia was perfectly open to define harvesting as a service
incidental to agriculture, and that:
... all countries do choose their own definition and stick with
what the WTO says: that this is a service incidental to agriculture. Countries
are completely within their rights to define it that way.
Our relationship with Pacific states on labour migration
Pacific Island countries have for some time wanted Australia to provide
seasonal work opportunities for their unemployed and have raised the issue with
Australian governments over a number of years. One of these occasions was during
negotiations for the Pacific Agreement on Closer Economic Relations (PACER), a
broad umbrella agreement for all Pacific Forum members, which was signed in
PACER requires that Australia and New Zealand be treated at least on the
same negotiating basis as the European Union, which is in negotiations with
Pacific states over an Economic Partnership Agreement (EPA). Preliminary
negotiations have canvassed labour mobility. Should they form part of the final
agreement, provisions relating to labour mobility may give Pacific states the
opportunity to open negotiations with Australia (and New Zealand) in the same
Some Pacific states were evidently encouraged by the Senate's 2003
Report which recommended the
Australian Government support moves to develop a pilot program to allow for
labour to be sourced from the region for seasonal work in Australia.
The Government noted the recommendation but said that 'Australia has
traditionally not supported programs to bring low skilled seasonal workers to Australia'.
At the Australia-Papua New Guinea Ministerial Forum in December 2004,
the issue was raised by the Papua New Guinean Foreign Minister, Sir Rabbie Namaliu,
who sought access to Australia for unskilled and semi-skilled Papua New
Guineans for seasonal work, such as fruit picking. The issue came up again at
the 2005 Forum. Australia confirmed it had no plans to introduce a seasonal or
guest worker scheme.
In May 2005, Pacific Forum trade ministers commissioned an investigation
of the potential benefit of a move under PACER towards a comprehensive framework for trade
(including services) and economic cooperation between Australia, New Zealand
and Pacific Islands. Two months later, Pacific Islands Forum economic ministers
considered the issue of labour mobility in the Pacific at their meeting in Tuvalu.
Forum economic ministers recognised the need for further examination of labour market
issues in the Pacific, including 'the issue of labour mobility through the
region and beyond'.
More recently, the issue has been raised in the context of the
development of the Pacific Plan. The Plan aims to create links between
countries of the region and identify sectors where the region could gain the
most from sharing resources of governance and by aligning policies. The Pacific
Plan was commissioned by delegates to the Pacific Islands Forum meeting in Auckland
in 2004 and subsequently endorsed by them at the Port Moresby Forum in October
2005. The Plan calls for integration of services, including temporary movement
of labour, into the Pacific Islands Countries Trade Agreement (PICTA) and the Economic
Partnership Agreement (EPA) that Pacific Island states are currently
negotiating with the European Union. Australia is not a party to PICTA or to
the negotiations with the European Union.
At the 2005 Port Moresby Forum, Prime Minister Howard, in response to
approaches from some Pacific leaders, confirmed that Australia would not accede
to requests to introduce a seasonal or guest worker scheme. It was at that time
that the Prime Minister announced an intention to establish a multi-campus technical
college for the Pacific. It is intended that the college will increase
significantly the numbers of skilled workers in the Pacific and facilitate the
mobility of workers within and beyond the region, including to Australia. The
technical, vocational and trades training undertaken by the college will meet Australian
accreditation standards, with the intention of enabling Pacific islanders to be
more competitive in the global skilled labour market, including Australia. According
to the DFAT submission, the college is not intended to encourage an outflow of
qualified people with much needed skills from island states to Australia and
other developed countries. Nonetheless, this will occur because the assets of
Pacific states are mostly human capital. The value of this capital is most
profitably realised abroad. The same economic logic would apply to unskilled
The government expects that Pacific states will continue to press for
seasonal worker access to the Australian labour market. Most recently, at a ministerial
meeting of the Melanesian Spearhead Group in 2006, PNG, Solomon Islands, Fiji
and Vanuatu agreed to pursue the issue of labour mobility 'at every opportunity
in regional and bilateral meetings'.
The Pacific states are correct in seeing a benefit in exporting their
unskilled labour. The Asian Development Bank confirmed that Pacific island
economies would gain substantially from sending unskilled labour to Australia
and New Zealand. The report also found benefits for the Australian economy in
taking in the labour
Given that the Pacific region already features prominently in Australia's aid
and development objectives, proponents of a seasonal mobile labour force in the
Pacific see much to commend in the integration of any labour scheme with Australia's
aid program in the region. There is unanimous agreement among bankers,
including the World Bank and the Asia Development Bank, and among academic
experts, that stimulation of Pacific island economies through remittances, through
increasing the skill levels of workers from the islands, and reducing the
economic isolation which plagues many Pacific states, are all valuable
contributions to achieving identified aid objectives. The movement of unskilled
labour, even to a limited extent, and on a temporary but systematic basis, is
consistent with these other objectives.
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