1999: The Year For Trade Liberalisation

  • Dr Lockwood Smith
Foreign Affairs and Trade

Diplomatic Club Luncheon
Ambassador Suite
Plaza International Hotel

New Zealand sees 1999 as potentially a great year for trade liberalisation. As Trade Minister, I've spoken often about what I see as a unique convergence of events to achieve better market access for New Zealand exporters:

the possibility of a free trade agreement with the United States;
APEC's trade liberalisation agenda;
the World Trade Organisation's negotiations to liberalise agricultural trade, and the prospect of a full, comprehensive Round.
Nineteen ninety nine is the year for each. We trust 1999 will be the year President Clinton is granted fast-track negotiating authority, allowing for progress towards an FTA. New Zealand is in the chair of APEC in 1999, and we'll be working to bind the EVSL package at the WTO. The WTO agriculture negotiations are mandated to start before the end of next year, and work is progressing well for them to be launched late in the year in the United States. From New Zealand's perspective, we don't see three such opportunities converging in quite the same way ever again.

New Zealand chairing APEC is the biggest trade policy challenge we've ever faced - which is appropriate given that APEC has been described as the biggest trade policy initiative in history. The Leaders' Meeting will be the most important meeting ever held in this country. We relish the challenge.

New Zealand is taking over the chair at a difficult time for the APEC region. The IMF has described the Asian Economic Crisis as "one of the worst financial crises in the post-war period". Latest Consensus Forecasts for 1998 suggest that South East Asia will contract by over 5% and for North Asia to experience no growth. Most APEC economies have

been hard hit. The economic woes of one of APEC's newest members, Russia, have been severely exacerbated. Here in New Zealand, we have experienced a small recession. Globally, the IMF forecasts growth to be down to 2% in 1998.

Some in the international media have criticised the extent of progress made at last week's APEC meetings in Kuala Lumpur. I can understand that criticism if one were to compare the outcome with the agenda set in Vancouver, and ignored the events in the region since. But were you to compare the KL outcome with how developments appeared to be heading only a few weeks before, I think you would reach a different conclusion. I believe it was a very credible outcome. I found it heartening. I believe economies with severe economic difficulties showed great vision and leadership in staying true to APEC's goals. I say that as Trade Minister from an economy which likes to see itself as being a major advocate for faster and more comprehensive liberalisation.

The Bogor goals were reconfirmed: free and open trade and investment by developed APEC economies by 2010, and the same for developing APEC economies by 2020. In KL, a record six economies, including the economic powerhouses the United States and Japan, agreed to submit their Individual Action Plans, outlining how they intend to achieve those goals, to peer review in 1999. By the end of 1999, 12 of APEC's 21 economies will have been peer reviewed, including New Zealand which has, of course, already decided to abolish all our tariffs by 2006.

It is a process that is working. Chile, for example, recorded in its IAP its intention to reduce its applied tariffs across the board from 11% to 6% by 2003. Indonesia has implemented its commitment to cut tariffs on all food items to a maximum of 5%. China has announced its commitment to cut tariffs on 5,700 industrial tariffs to an average of 10.8% by 2005. It will eliminate tariffs on 185 IT products by the same year. These are just three examples, but they show the APEC approach to trade liberalisation is working.

Early Voluntary Sectoral Liberalisation is also firmly on track. Given the economic situation in the region, it would have been all too easy for some economies to start to unravel the package. They did not. They recognised that unravelling the package would have further undermined business confidence in the region. They recognised that by maintaining the commitment to the package, APEC could send a powerful signal which would help to restore business confidence.

All sixteen participating economies, including the US and Japan, remain part of the package. All nine initial sectors, including the contentious forestry and fisheries sectors, remain part of the package. The Kuching end-rates and end-dates remain in place. And there is agreement that APEC economies may begin implementing the package immediately.

Even more importantly, it goes to the WTO to become binding, and to achieve wider participation. There is commitment by all 16 participating APEC economies to endeavour to conclude agreement next year.

In the context of the Asian Economic Crisis, that was a very credible agreement. All 16 participating economies have publicly committed themselves to the deal. We in New Zealand trust that they will live up to that commitment.

At the same time, progress was made on the trade and investment facilitation front. APEC agreed to work towards aligning electrical and electronic equipment standards by 2004 for developed economies and 2008 for developing economies. A menu of options for investment liberalisation and facilitation was agreed to. We made progress on principles for government procurement, for conclusion in 1999. We agreed to expand the availability of multiple entry visas. The APEC Business Card offers accredited business travellers visa-free travel and speedy processing when visiting participating economies. New Zealand will join in March.

In all these areas, the aim is to make doing business in the region cheaper and faster. APEC's business people have estimated that the average international transaction involves between 27 and 30 different parties, 40 documents, 200 data elements and the retyping of 60 to 70% of all data at least once. There is clearly a lot APEC can do to improve upon that throughout our region.

In KL, APEC also endorsed an action programme on skills development. It's part of APEC's ecotech work, and is designed to contribute to a rapid improvements in four areas: upgrading the industrial skills base, spawning new entrepreneurs, improving technology skills, and strengthening institutional infrastructure to facilitate trade and investment liberalisation.

The aim of all of APEC's ecotech work is to ensure that every APEC economy has the human, institutional and physical infrastructure to be able to implement and benefit from APEC's liberalisation agenda. The new action plan will certainly help.

The economic crisis was also directly addressed by APEC leaders, with their Cooperative Growth Strategy. It included a renewed commitment to the 2010/2020 Bogor goals. It has a strong focus on encouraging growth-orientated macroeconomic policies. It will provide for additional financial assistance to soften the social impact of the crisis. It involves initiatives to encourage restructuring of the finance and corporate sectors and to restore trade finance and stable capital flows. And there are measures to strengthen domestic and international financial systems. The package will be supported by Japan's offer of a US$30 billion aid package as well as the joint Japan-US-ADB-World Bank initiative to revitalise private sector growth.

APEC, the extended G-22, domestic economies, and multilateral and regional development banks will share responsibility for its implementation.

It is in this context that New Zealand will take over the chair of APEC. We'll be developing initiatives around three key themes:

trade and investment liberalisation and facilitation
strengthening markets, and
broadening support for APEC
One key priority for 1999 will be to develop the remaining six sectors for EVSL, among them food. We are also particularly interested in the APEC Business Advisory Council's proposal for an APEC Food System, which leaders have requested us to study. The goal of the proposed APEC Food System is to achieve a more open, more robust food system. It would be one which would better harness the resources of the region, efficiently linking producers, processors and consumers throughout the region. The idea is to maximise the contribution the food sector makes to the wealth of the region. ABAC's proposal calls for action in three areas: rural infrastructure, dissemination of technical advances and promotion of trade.

Making progress on food will not be easy. But New Zealand sees progress on the issue as not just being about providing better access for our exporters. Ensuring the efficient production and distribution of food is critical to enhancing the long-term stability of a region with a growing population. It is a perfect APEC project involving all three of APEC's pillars: trade liberalisation, trade facilitation, and economic and technical cooperation.

New Zealand also has work planned to strengthen markets and restore investment flows, as part of the ongoing response to the economic crisis. Closely related are ecotech measures to strengthen corporate and economic governance. In response to the KL meeting, there will be work on examining how competition and regulatory reforms can help facilitate trade and investment. We'll also be working on implementing APEC's Blueprint for Action on Electronic Commerce.

Our APEC agenda is ambitious. But we're confident that each member economy is sufficiently committed to ensuring that the APEC process works. I don't deny that New Zealand sees the APEC process as leading to substantial gains for our exporters and economy. Seventy percent of our two way trade is with APEC economies. Eight of our top ten markets are APEC economies, and 12 of our top 20 tourist sources. Eighty percent of our investment comes from within APEC.

But we also recognise the historic importance of APEC to the region. In the last 25 years, we've seen huge growth in regional consultation, cooperation and trade through the Asia Pacific region. It has meant that more people have risen out of poverty in a shorter period and on a greater scale than at any other place or time in human history. What's

more, New Zealand holds the view that greater economic integration contributes to the maintenance of peace and greater stability. We believe that the success of APEC's trade and investment agenda will play a major part in ensuring continued improvements in standards of living and stability throughout the Pacific Rim. We see APEC as a development of world historical importance.

We also see the World Trade Organisation as having the same role, but globally. We believe that all economies should, assuming obligations are met, be members of the WTO. We were the first country in the world to complete our bilateral negotiations with China on its accession to the WTO. We are supportive of Russia's joining, should it meet WTO obligations. Our ultimate goal - admittedly unrealistic in anything other than the long term - is free trade covering all economies and all goods and services. We believe that were that goal to be achieved, it would play a major role in promoting peace and enhancing living standards globally.

To New Zealand, agriculture is of primary importance because it is our major export earner. But we also believe that free trade in agricultural products is the best way of ensuring food security in a peaceful world. We therefore look to the mandated WTO agriculture negotiations as not just being of benefit to the New Zealand economy. We see the negotiations as taking us towards the goal of efficient production and distribution of food globally, thereby contributing to international stability.

At the negotiations next year, we will be seeking progress far in excess of that achieved from the Uruguay Round. With our friends in the Cairns Group, we will be seek trade in agricultural products to be put on the same basis as trade in other goods. Specifically, we will be seeking:

n market access and deep cuts in tariffs
elimination and prohibition of export subsidies
decoupling of domestic support from production
Like New Zealand's APEC agenda, the Cairns Groups goals are ambitious but realistic. We recognise that to achieve them, a full, comprehensive Round may be required in order to allow for the necessary trade-offs. New Zealand is therefore a supporter of a Round, working with the Friends of the Round group to achieve one.

The Friends of the Round is an open and informal collection of 13 WTO members. In Hong Kong, China, last week we said we believed that, with the financial crisis, economies needed further opportunities to trade their way back to improved prosperity and employment. We therefore concluded that a full and comprehensive Round is needed with the goal of securing a high quality outcome within a short duration. We will be working to achieve the launch of a Round following the Third WTO Ministerial in the United States next year. We urge all other WTO members to support those goals.

I began by saying that New Zealand believes 1999 could potentially be a great year for trade liberalisation. We will be working hard for the liberalisation agenda to make progress as far and as fast as possible. We believe that is in the interests of the populations of all APEC economies and all WTO members. We know it will not be easy. We know there will have to be compromises along the way. But we urge all our partners to work constructively towards a regional and global trading environment which is as free and open as possible. Because we believe that would do more than almost anything else to help create more employment, prosperity and stability throughout the region and the world.