Amid the rising tide of protectionism across the global economy and the crisis of global platforms such as the G20, the state of North-South economic relations is clearly moving downhill. Perhaps too often the pathways to developing the North-South cooperation were largely explored through the lens of North America/US-Latin America as well as Europe-Asia/Africa relations. With both these regional tracks in North-South connectivity in crisis mode, there may be a need to explore alternative gateways to boosting economic cooperation between advanced and developing economies. One such path could be the region of South Pacific, where developed economies such as Australia and New Zealand could explore the modalities of greater inclusivity and openness with respect to developing economies such as Indonesia and Chile in reinvigorating the North-South economic dialogue, making it more balanced and pragmatic.
Indeed, of the three main gateways to regional North-South cooperation (US-Latin America; Europe-MENA; Australia-Southeast Asia/Oceania) the US and the European tracks are particularly pressured by the rising tensions over migration flows as well as concerns over trade and investment imbalances with some of the largest economies from the Global South such as China. In this respect, the South Pacific region is less susceptible to such tensions, given the lower prevalence/criticality of land borders and accordingly less scope for intensive migration flows. There is also more trade openness in the region as reflected in the emergence of the PACER Plus agreement – a free trade accord that entered into force in 2020, bringing together New Zealand, Australia, and the small island economies of the South Pacific[1].
The region of the South Pacific may be viewed as one of the unique locations in the global economy – its remoteness from the main centers of power and economic flows in the Northern Hemisphere arguably had its pros and cons for regional economic performance, with the neighboring (albeit still somewhat distant) Southeast Asia and the ASEAN integration bloc being a key gateway for the South Pacific into the global economy. Some of the noteworthy economic features of the South Pacific region include the following:
- Australia: longest streak of continuous economic growth in the preceding several decades among major advanced economies
- New Zealand leading in global rankings in terms of the regulatory environment and business climate
- Existential challenges posed by climate change with respect to the small island economies of the South Pacific region
- Geographically, the region is surrounded (though still at a distance) by all three key centers of the Global South – South America, Africa and Asia
The latter geographical factor supports the need for Australia to seek closer economic ties with its partners from the developing world. In this respect, in building the North-South economic ties in the South Pacific region, there could be scope for a more active involvement of developing economies such as Indonesia and Chile in the roll-out and expansion of the regional economic cooperation platforms such as PACER-plus or other regional initiatives. This would allow for a more balanced representation of developed and developing economies in a South Pacific economic cooperation platform, while also endowing it with greater scale and connectivity with some of the key regions and blocs in South Pacific’s vicinity – ASEAN in the case of Indonesia and the South America/Pacific Alliance region in the case of Chile. Thus far, Chile and Indonesia are not fully involved in the key regional forums/platforms (dialogue partners in PIF and no full membership in the PACER-plus) despite technically being part of the South Pacific region.
Geographically, most of Indonesia’s territory and population is located south of the equator, with the easternmost parts of Indonesia, particularly Papua (New Guinea’s western part), bordering or lying within the South Pacific Ocean region. Indonesia’s unique geography enables it to serve as a key gateway and connectivity hub between South Pacific, Southeast Asia and the Indian ocean region. Chile’s geography also comprises parts of South Pacific, including the country’s coastline and such islands as the Easter Island and the Juan Fernández Archipelago.
Bringing Chile and Indonesia closer into the cooperative arrangements in the South Pacific will be greatly facilitated for Australia and New Zealand by the experience of economic cooperation in such forums as APEC (all four), RCEP (New Zealand, Australia and Indonesia), CPTPP (Chile, New Zealand and Australia). Indonesia has also worked with Australia within the G20 as well as platforms such as the Indian Ocean Rim Association (IORA). Australia has a free trade agreement with Chile (entered into force in 2009)[2] and in 2019 the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) was signed[3].
There is also the important linkage of Indonesia-Chile economic ties – in 2024 Indonesia launched the investment negotiations for the Indonesia-Chile Comprehensive Economic Partnership Agreement (IC-CEPA)[4]. The IC-CEPA agreement has been in effect since 2019 and according to Indonesia’s Deputy Trade Minister Dyah Roro Esti, “the implementation of the Indonesia-Chile CEPA has brought real benefits, as reflected in the average annual bilateral trade growth from around US$304 million before the agreement to US$446 million in the post-implementation period”[5].
In view of the above observations, there could be a case for what may be termed as the South Pacific Partnership (SPP), formed by Australia, New Zealand, the island economies of PIF, Chile and Indonesia. Apart from boosting economic cooperation through further trade and investment liberalization, a South Pacific Partnership could potentially coordinate approaches and policies with respect to the production and trade in such mineral resources as nickel (Indonesia being a key global supplier), iron ore (Australia), copper (Chile), lithium (Australia, Chile).
A wider SPP+ arrangement could involve some of the developing economies in the broader region of South Pacific and Indian ocean, including Peru in Latin America as well as South Africa being one of the key connections to the African gateway of North-South cooperation in the Southern Hemisphere[6]. The SPP+ arrangement could then become a building bloc in the emerging cooperative framework of the Southern Hemisphere’s regional platforms that include the South Atlantic, the South Pacific and the Indo-Pacific regions. Forging greater connectivity between the South Pacific and the contiguous parts of the Global South in Africa, South Asia, East Asia and Latin America could prove superior to projects such as the Indo-Pacific Economic Framework (IPEF), whose economic agenda appears to have fizzled out in recent years. A more neutral positioning of the South Pacific region on the international stage would prove to be crucial for ameliorating North-South ties, particularly in view of the centrality principle espoused by ASEAN and Indonesia as the bloc’s largest economy.
There are several advantages to pursuing North-South cooperation in the South Pacific region within the SPP/SPP+ framework compared to the increasingly problematic American and the European regional tracks. One is that the economic weights of developing and developed economies in such a regional configuration are broadly comparable – Chile’s GDP (USD 330 bn in 2024) is broadly on par with that of New Zealand (USD 280.6 bn), while the size of Indonesia’s economy (USD 1.44 trn in 2024) is not too far off from that of Australia (USD 1.8 trn in 2024)[7]. Another factor, is that on both sides there are well-structured regional integration blocs (ASEAN in the case of Indonesia and ANZCERTA in the case of Australia and New Zealand) that may support the development of economic ties in the South Pacific region. Also, there is far less history of conflict and tensions between the regional players in the South Pacific compared to Europe and the US.
Such a positioning of the South Pacific in the sphere of North-South relations may potentially favor its economic ties not only with the regional neighbors from the Global South, but also with platforms such as BRICS+/BRICS++. Indeed, compared to the US and Europe, where relations with BRICS in the past several years became increasingly tense, the advanced economies of the South Pacific are already cooperating with some of the BRICS members in common regional platforms such as RCEP. Australia and New Zealand have supported multilateral trade liberalization and WTO reform, and of the largest developed economies Australia has arguably been the most active in improving economic ties with China as well as partners from ASEAN in recent years. A more pragmatic and less politicized stance on building relations with the Global South, with a concrete/detailed agenda for economic cooperation would position Australia and New Zealand ahead of other developed economies in building ties with the rising BRICS+ bloc. In terms of the near to medium-term possibilities, in 2027, when China takes over the presidency in BRICS, the 10th anniversary of the BRICS+ initiative could be marked by the invitation of the representative of the RCEP Secretariat.
In the end, the South Pacific gateway to boosting North-South cooperation may be an overlooked reserve to a more even-keeled and balanced pattern of economic ties between advanced and developing economies. Granted, the South Pacific region may seem tangential to mainstream geopolitics on the map, positioned too far away from the traditional centers of global policy-making. Even the geography of North-South terminology is turned on its head in this part of the globe, as Australia and New Zealand lie to the South of such Global South economies as Indonesia. Nonetheless, it could well be that the “mainstream regions” of global politics and economics are entering into overdrive/overheating mode and there may be a need to explore alternative regions and pathways to redirect economic diplomacy to those parts of the globe that are not as burdened by the history and acrimonies of past conflicts. In this regard, the South Pacific region of the global economy could present a safe haven for resuscitating economic cooperation and a framework to reinvigorate the North-South economic ties by forging connectivity between the South Pacific region with the surrounding regional blocs of the developing world.
[1] https://www.dfat.gov.au/trade/agreements/in-force/pacer/pacific-agreement-on-closer-economic-relations-plus
[2] https://www.dfat.gov.au/trade/agreements/in-force/aclfta/australia-chile-fta
[3] https://www.abf.gov.au/importing-exporting-and-manufacturing/fta/free-trade-agreements/indonesia
[4] https://english.news.cn/asiapacific/20240613/ad0d20c0444444f38e547d3af639a42c/c.html
[5] https://en.antaranews.com/news/378593/indonesia-chile-trade-continues-to-grow-ever-since-ic-cepa
[6] There may also be an “integration of integrations” configuration for the South Pacific region that may involve the participation of the ANZERTA, PACER-Plus (that advances economic cooperation between Australia, New Zealand and the economies of the Pacific Islands Forum (PIF)), ASEAN and Latin America’s Pacific Alliance. Within the broader region that brings together economies from the South Pacific and Indian ocean basins, there could be scope to further widen the circle of participating regional blocs to include the Indian Ocean Rim Association (IORA) or the South African Development Community (SADC) together with the East African Community (EAC). Such an extension in the array of regional integration arrangements would open up more geographical vectors to North-South cooperation in the Southern Hemisphere.
[7] https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/WEOWORLD/ADVEC
Yaroslav Lissovolik, Founder, BRICS+ Analytics
Image by beasternchen via Pixabay