Australia raises colonialism fears over South Pacific union plan

Australia has ignited fears that it nurtures neo-colonialist ambitions after urging tiny South Pacific states to unite with it in a European Union-style political and economic community with a common currency - the Australian dollar.

The proposal is to be discussed in Auckland this week at the Pacific Islands Forum, the annual summit held by Australia, New Zealand and 14 small nations. A report published by an Australian parliamentary committee yesterday recommended the establishment of a regional community to fight poverty and other threats such as money laundering and terrorism.

The concept is forcefully supported by the Prime Minister, John Howard, who has called on Pacific leaders to pool their resources and expertise. But, with Australia's military intervention in the Solomon Islands already fuelling concerns that it regards itself as a regional policeman, some countries are worried that closer union could compromise their sovereignty.

New Zealand, which is chairing this week's meeting, appears sensitive to those fears. The country's Prime Minister, Helen Clark, said: "Pacific leaders will listen to what Australia has to say, but they will have an idea in their minds as to what the issues are for them in going into super-national arrangements. They will need to think about and wrestle with that."

Australia and New Zealand are concerned about an "arc of instability" in their backyard that includes the Solomons, Vanuatu and Papua New Guinea. Australia heads a multinational force sent to the Solomons last month to restore law and order in the former British protectorate, which has been torn apart by anarchy and ethnic violence.

While the Solomons is a striking example of a Pacific paradise gone sour, many other nations are struggling to survive. With populations of less than 100,000, they lurch from one economic crisis to the next, propped up by one-off money-raising schemes and buckets of foreign aid. Their plight, Australia believes, makes them vulnerable as targets for gun runners, drug smugglers and even terrorists.

The parliamentary report said a Pacific community should have "a common currency, preferably based on the Australian dollar ... a common labour market and common budgetary and fiscal standards". It also says that Islanders should be allowed into Australia for seasonal work such as fruit-picking.

Mr Howard will present a plan to the summit, which opens today, for a regional police training programme to be based at an academy in Fiji.

Asked if the aim was to establish a Pacific police force, he replied: "One thing can lead to another." Resentment is already bubbling at Australia's perceived attempts to throw its weight around in the Pacific. Some states are threatening to contest its nomination of an Australian diplomat to be secretary general of the forum, a post traditionally decided by consensus.

Phil Goff, New Zealand's Foreign Minister, said the proposed South Pacific community should not challenge the identity or national pride of small states. "They don't want people making decisions for them," he said.