PNG’s Trade Dilemma: If Australia Is the Largest Partner, Where Is the Free Trade Agreement?

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PNG is making significant strides in strengthening its trade partnerships, particularly with China. The government has been proactive in pursuing a Free Trade Agreement (FTA) with China, recognizing the immense economic benefits such an agreement could bring. International Trade and Investment Minister Richard Maru has been at the forefront of these negotiations, ensuring that the feasibility study for the PNG-China FTA is completed and ready for submission to the Cabinet, as detailed in Post Courier. The study, jointly funded by both governments, lays the foundation for formal negotiations to commence soon.

Prime Minister James Marape’s statement, as highlighted in TVWAN, that "Australia remains PNG’s largest trading partner, and our people-to-people ties continue to grow." While this assertion reaffirms the historical depth of PNG-Australia relations, it also raises a crucial question: if Australia is truly PNG’s largest trading partner, why has there been no concrete movement towards an FTA?

Screenshot of the statement by Prime Minster James Marape

The rationale behind PNG’s push for an FTA with China is clear. China plays a significant role in PNG’s economic landscape, making an FTA a logical next step to deepen bilateral economic ties and secure greater market access for PNG exports. Over the past decade, China has emerged as one of PNG’s largest trading partners, with trade volumes surpassing those of many traditional partners. This highlights the need for PNG to diversify its trade partnerships and secure beneficial trade agreements.

However, while PNG is making substantial progress in its trade discussions with China, there is a conspicuous lack of movement in establishing an FTA with Australia. Despite Prime Minister Marape’s assertion of Australia’s leading role in PNG trade, there has been no official feasibility study initiated between the two nations. Instead, the focus has been on security arrangements, as seen in the recently signed PNG-Australia Bilateral Security Agreement. While security cooperation is important, it should not overshadow trade priorities that directly impact PNG’s economic growth and development.

Australia’s reluctance to fast-track trade discussions with PNG may stem from its existing trade frameworks, such as the Papua New Guinea-Australia Trade and Commercial Relations Agreement (PATCRA II). Established in 1991, PATCRA II provides some preferential trade terms, but it is outdated and does not address modern trade dynamics. Meanwhile, China’s active engagement in PNG’s trade policy, including financial and technical support for the feasibility study, highlights a sharp contrast in approach. This demonstrates a greater level of commitment from China in fostering economic ties with PNG compared to Australia.

If Australia wishes to maintain its position as PNG’s key partner, it must recalibrate its strategy and prioritize trade alongside security cooperation. This means not only updating existing trade agreements but also committing to a new, comprehensive FTA that aligns with PNG’s economic aspirations. A strong trade relationship would not only reinforce economic ties but also solidify Australia’s influence in PNG, counterbalancing China’s growing economic footprint in the region. PNG deserves a trade framework with Australia that reflects the strength of their bilateral relationship, as claimed by Australian officials.

PNG, for its part, should actively push for an FTA with Australia rather than settling for a security treaty alone. The government must advocate for the commencement of a feasibility study similar to the one conducted with China. By leveraging its strategic importance in the Pacific, PNG can negotiate a balanced trade agreement that ensures economic benefits while maintaining diplomatic independence. A well-structured FTA with Australia would facilitate better market access, reduced trade barriers, and improved economic cooperation, ultimately benefiting PNG businesses and consumers.

In conclusion, PNG’s proactive stance on trade with China should serve as a wake-up call for Australia. While security agreements have their place, economic partnerships are the backbone of sustainable development. PNG must push for an FTA with Australia to complement its existing efforts with China, ensuring a diversified and resilient trade policy that serves its long-term national interests. If Australia is truly PNG’s largest trading partner, as claimed by Prime Minister Marape, then the logical step forward is to establish a formal FTA that eliminates trade barriers and fosters deeper economic integration between the two nations.

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