Hands Across the Water

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Honiara, the capital of the solomon Islands, has two buildings that could fairly be called grand: Parliament House and the national bank. Symbols of a 25-year-old independence, they are today little more than shells. The country is bankrupt, the government barely functioning. Armed thugs and corrupt officials hold the state to ransom; foreign aid is needed to keep the most basic services going. With peacekeeping and much of the administration about to be turned over to Australia and New Zealand, the nation the Parliament and bank represent has all but disintegrated.

Once known as the Happy Isles, the Solomons is on the verge of becoming the Pacific's first failed state. It's unlikely to be the last. From Papua New Guinea to Nauru and from Vanuatu to Tonga, island nations are racked by economic and social ills. According to economist Helen Hughes, of Sydney's Centre for Independent Studies, massive injections of aid have left ordinary islanders little better off than 30 years ago, and corruption and violence are growing. Unless ailing countries can be put back on their feet, Hughes says, Australia and New Zealand can expect more trouble in the neighborhood: "If there's no change, we will have 10 Solomons in the Pacific within a generation."

As governments, think tanks and aid agencies grapple with that prospect, an old idea is gaining new traction. Rather than throwing money and advice at their neighbors, argue Hughes and other veteran Pacific watchers, Australia and New Zealand should build a common house with them, extending their Closer Economic Relations pact to P.N.G. and the island nations of the South Pacific. The resulting economic community would use a common currency (likely the Australian dollar) and allow the free flow of trade, capital and labor. "Nothing we're doing at the moment is working," says Ron Duncan, a development economist at the Australian National University. To help the Pacific help itself, "we have to raise the stakes."

For small countries, a union has obvious attractions. A more stable currency and easier access to markets would boost economic growth and investment. Parliaments would stay, but shedding national banks and sharing airlines and institutions would save vast sums and cut off avenues for corruption. The reforms needed to meet economic tests for membership would bring benefits of their own, says Mike Moore, a former New Zealand prime minister and former director-general of the World Trade Organization: "Studies show that countries preparing for entry to the E.U. and wto do better than those without such objectives. The economic discipline brings with it growth, social progress and better governance."

For Australia and New Zealand, the direct payoffs of a Pacific union would be modest, but a happier neighborhood could be worth billions in the long term. "Look at what the Pacific costs us now," says Duncan. "Australia is having to shovel out foreign aid, put troops into the Solomons, and it's all costing us money and loss of face. We are the superpower of the region, and if these countries fail, it is seen as our fault."

Desirable though a union might be, however, few island nations are ready even to contemplate it, says Mark Halabe, a Fiji manufacturer and ex-president of the Fiji-Australia Business Council. "These countries need global trade, they need to export their products to survive," he says. "But current levels of development will make a marriage very hard to achieve without destroying the local economies." Opening up migration would be especially contentious, he says: "If Australia and New Zealand allow unfettered access to their job market - which I doubt will happen - everybody will leave the islands and go to Australia and New Zealand."

Several Pacific nations already have many more people overseas than at home; Niue, its population down to 1,500, may soon merge with New Zealand. But in Australia, which limits migrants' access to welfare, Samoans and Tongans earn more than the average Australian wage, and exiles' remittances keep many island countries afloat. Labor mobility can benefit small economies in other ways, says Satish Chand, of the anu's National Centre for Development Studies: "Leaders say, Hey, people can vote with their feet - we need to govern better. And one reason the Cook Islands succeeded with its [public service] reforms was that a lot of people who were thrown off work were able to move to New Zealand and get jobs."

Even the most optimistic advocates of union concede that it could take 10 years or more to work through all the issues and concerns. "The Pacific way is to do things gradually," says Moore. "You can't just FedEx in a set of rules and say, This is how it will be done." But the region's big powers, he says, should start laying the groundwork of common institutions, standards and training systems. So far there's scant official interest in a union, though the idea has been aired at the ongoing Australian Senate inquiry into relations with the Pacific. But the nettle must be grasped, says Donald Denoon, a Pacific historian at the anu: "Anything less [than a union] is simply delaying the collapse of the smaller economies and polities, with catastrophic consequences for Australia." In the Solomons, its economy and polity perhaps beyond rescue, peacekeepers will soon have a foretaste of what that could mean. n