Monetary Regional Institutional Difference


Custom Union Integration of
Free trade with 3rd
part country
Covers the whole


Yes (Targeted subsidies)




÷ (Pacer §7a)

÷ (Pacer §2)

Yes (Pacer §6,11)

÷ (Picta §26,1)

Custom Union: An existing free trade agreement has been installed by the Pacific Agreement on Closer Economic Relations (PACER) between the 14 island states. The level of cooperation should though not be mistaken for customs union, where the members
agree to free trade amongst them but also have a common external tariff, ie. they apply a common tariff against imports from the outside world.

Integration of economies:  How should weaker economies be integrated? Should particular vulnerable sectors be protected? 42% of the total EU budget goes into targeted
subsidies, thus shielding specific sectors from competition. The Pacer agreement has clear intentions of the diffusion of capabilities and knowledge between the island states, but no clear policy tools to promote this is provided.

Free trade with 3rd part country: The Pacer agreement has been construed so as not to undermine or impede the ability of any government to effectively and independently negotiate a free trade arrangement with a third country. The ability to be a part of any FTA is as a result of this the perogative of any sovereign island state. This is in sharp contrast with general EU policies, where any potential FTA with a 3rd party country is negotiated by
the EU Commission on behalf of the member states.

Covers the whole region:  Even though individual EU member states do have opt-outs, the EU policies in general, always apply to the entire region. The Pacific Island Countries Trade Agreement (PICTA) only applies to the island states, not to the Australian and New Zealand state. This functions as a significant distortion to the integration of the pacific economies as a whole