Apec '98: Setting The Scene For New Zealand '99

  • Dr Lockwood Smith
Foreign Affairs and Trade

Post-APEC Luncheon
Carlton Hotel

Prime Minister; Ladies and Gentlemen of the Auckland Business Community.

The Prime Minister's overview makes clear that, given the Asian Economic Crisis, we achieved a credible and heartening outcome from APEC '98 in Malaysia. Through the 1990s, APEC showed it could work well during the good times - setting goals for trade liberalisation which are so ambitious that APEC has often been described as the biggest trade policy initiative in history. Last week in Kuala Lumpur, APEC showed it can maintain its commitment to those goals when times aren't so good, and that was important. The scene is well set for APEC '99 here in New Zealand.

Perhaps APEC's most important goal is the 1994 Bogor Declaration on trade liberalisation: free and open trade and investment by developed APEC economies by 2010, and the same for developing APEC economies by 2020. It's a bold and ambitious goal. Every New Zealand exporter could tell a different story of how they would gain from free and open trade around the Pacific Rim. Just think of free and open trade with the United States, with Japan, with China, with Korea, and with South East Asia.

Compared with your ability - the export sector's ability - to move quickly, these regional developments between economies may never come quite as fast as you may want. But APEC is making progress which, in diplomatic terms, is both speedy and significant. APEC economies are preparing Individual Action Plans and Collective Action Plans outlining their progress towards the Bogor 2010/2020 goals.

APEC is not a rules-based organisation like the World Trade Organisation. We do not have a set of binding rules which tells economies what they can and cannot do. We trust one another to find our

own ways to achieve the goals we have publicly committed to. It's a matter of honour and it's working.

Chile, for example, has 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 lines to an average of 10.8% by 2005. It will eliminate tariffs on 185 IT products by the same year. New Zealand, of course, will get rid of all our tariffs by 2006. At the same time, Collective Action Plans are leading towards developments in government procurement, intellectual property enforcement, easier travel through the region, and food safety, to name just four.

These are all steps towards those ultimate 2010/2020 goals. Work on these plans is speeding up. A further six economies - including the US, Japan and Australia - have agreed to submit Individual Action Plans to peer review in 1999. That will bring to 12 the number of economies to have gone through the process. And, next year, we'll be assessing overall progress through the IAP process towards the 2010/2020 goals.

When New Zealand leaves the chair of APEC, we'll be just 10 short years away from the full implementation of free and open trade and investment amongst developed APEC economies. But, in certain sectors, we want to move ahead of the 2010/2020 goals.

In Vancouver last year, we launched the Early Voluntary Sectoral Liberalisation process. Fifteen sectors were identified for fast-tracking - nine for work in 1998 and a further six in 1999. Among the first nine were forest and fish products - very sensitive sectors for some key APEC economies. The others were chemicals, energy, environmental goods and services, gemstones and jewellery, medical equipment, toys and a telecommunications mutual recognition agreement.

Since Vancouver, APEC economies have felt the effects of the Asian Economic Crisis. Through much of this year, I was very concerned that the package might unravel; that no progress would be made on those first nine sectors; that APEC's credibility would take a big hit. That has not been the case. Given the economic crisis, we made credible and heartening progress.

Some in the international media were sceptical of the outcome. That's understandable if you compare it with Vancouver. But those journalists who have followed developments more closely recognise that what was achieved was the best possible outcome given the concerns of key economies. All sixteen participating economies have remained part of the EVSL package. All nine sectors, including fisheries and forestry, have remained in the package. The tariff cutting offers made by individual APEC economies have been maintained. The goals of zero

tariffs for forest products by 2004 and for fish products by 2005 have been maintained. A number of economies will begin implementation immediately. The accompanying facilitation and ecotech measures will be implemented to the benefit of those doing business in those sectors.

The deal will now go to the World Trade Organisation, and all participating APEC economies, including the US and Japan, have publicly committed themselves to endeavouring to achieve a binding, rules-base agreement next year, with broader participation. Ensuring that happens will be one of my key tasks next year.

As chair of APEC, New Zealand will also be responsible for finalising agreement on the remaining six sectors for early liberalisation. Among them is food - essentially horticultural products and some processed food products. The other sectors are automobiles, civil aircraft, fertiliser, oilseeds and rubber.

We have also been charged with progressing the proposed APEC Food System. It was recommended by the APEC Business Advisory Council, and APEC leaders have charged us to study it. In my view, it is the perfect APEC initiative. It involves all three of APEC's pillars: trade liberalisation, trade facilitation, and economic and technical cooperation. We see it as a key component towards securing APEC's goals of security, stability and prosperity in the region. Efficient production and distribution of food is vital to meet the needs of a region with a growing population.

If we could make significant progress on the APEC Food System next year, it would set us up well for the World Trade Organisation negotiations to liberalise agricultural trade. They'll be launched in the United States shortly after the Auckland APEC Leaders' Meeting.

New Zealand and our friends in the Cairns Group have an ambitious but realistic vision for the WTO negotiations. We want trade in agricultural products put on the same basis as trade in other goods. We want open market access and deep cuts in tariffs, the elimination and prohibition of export subsidies, and the decoupling of domestic support from production.

We recognise that to achieve all that will require broader negotiations than just agriculture. To get the necessary trade-offs, we'll need a full, comprehensive Round. While some key WTO members already support a Round, it is not yet a universal view.

APEC has a major role to play. The Kuala Lumpur meeting agreed that APEC will work through 1999 to ensure the WTO negotiations are substantial. APEC has a major opportunity to help shape their scope and level of ambition. New Zealand, as the chair or APEC, will never again have quite the same opportunity to shape the global trade liberalisation agenda.

But there is more to APEC than seeking open market access and the elimination of tariffs. As exporters throughout New Zealand tell me,

the barriers you face are not just official trade barriers - quotas and tariffs. We need to do more than just remove them. We need to strengthen markets.

Our work in that area - strengthening markets - is about ensuring that genuine competition can be a reality in each market. It is about ensuring that consumers can get the best possible deal.

In a sense, doing business in the region has become easier. Technology has broken down the major barrier of distance. Market access is improving. But difficulties remain.

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. Business people can be up against cronyism or corruption in some markets. Business regulations can be obscure or complicated. Legal redress if things go wrong can be difficult or impossible. There can be Government imposed monopolies which prevent effective competition even if official trade barriers are lifted. Essentially, the commitment by APEC economies to free and open trade can be unintentionally thwarted by poor domestic policy.

I'll give you a simple example. An economy may reduce or eliminate tariffs for electrical equipment. But it may still be difficult or impossible for exporters to sell their products in that economy because of a set of hopelessly restrictive product standards. As a result, the aim of increasing competition in that market is thwarted.

That's why APEC is working to harmonise standards. For example, we're working to achieve alignment of electrical and electronic equipment standards by 2004 for developed economies and 2008 for developing economies.

New Zealand is also taking the lead on APEC's work on competition policy and regulatory reform. Since 1984, we have built up a great deal of experience of what to do and, from time-to-time, of what not to do. Our first goal is to achieve APEC endorsement of a set of competition principles. The principles would aim to encourage economies to provide an easier, cheaper and more certain environment for business.

Just as with trade liberalisation, where goals are set but the means to achieve them left to individual economies, specific market-strengthening reforms would be up to each APEC economy. They would need to take into account their own domestic policy settings and values. But APEC could assist with advice. It could encourage economies to consider reforms such as putting in place modern accounting standards or some initial form of competition law. There could be work on proper information disclosure standards. Economies could consider sensible reforms in vital areas such as telecommunications, electricity or transport, to improve competition. As the Prime Minister has put it, APEC would provide a tool-kit.

Should economies decide to embark down a particular track, APEC can also assist through our ECOTECH programme - or Economic and Technical Cooperation. It's seen as critical by APEC's developing economies in particular. Often they have the will to implement a particular reform, but not the means. For example, they might decide they want to introduce competition law, but they may not have the expertise to set up a Commerce Commission, or the lawyers or economists to staff it. ECOTECH is about assisting with these sorts of projects, as well as upgrading the industrial skills base, spawning new entrepreneurs and improving technology skills. It is an important aspect of APEC's work - ensuring that every APEC can economy can benefit from APEC's agenda.

As I said at the outset, APEC has been described as the biggest trade policy initiative in history. It is benefiting New Zealand. It is benefiting all the people of the region. Chairing it will be New Zealand's biggest ever trade policy challenge.

Over 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. It has contributed to the maintenance of peace and stability in the region.

As New Zealand takes over the chair of APEC, we are determined to build on that - to deliver to New Zealander exporters, but even more importantly, to all the people of the region. APEC is a development of world historical importance. As the next chair, New Zealand relishes our opportunity to be at the heart of its next stage of development.