• Don McKinnon
Foreign Affairs and Trade

Introductory comments

Thank you Ladies and Gentlemen

I'm delighted to be here in Manila, and particularly to be able to speak to you today.

My last visit to Manila was exactly a year ago when I attended the ASEAN Post Ministerial Conference. This annual event, which I am attending in Singapore this time, provides an excellent opportunity for me to catch up with my counterparts in the region, including my old friend, Foreign Secretary Domingo Siazon. I recall that when I was here on that occasion, you had been celebrating the hundredth anniversary of your independence from Spain.

We in New Zealand value our friendly and growing relationship with the Philippines. We have a lot in common. We share democratic and human rights values. We have similar approaches to regional and global issues and have long been partners in promoting greater understanding and stability in the Asia-Pacific region.

The Philippines' own experience demonstrates the important part a stable security environment plays in ensuring sustained economic prosperity. Recent events in Kosovo have shown how conflict can in a few months erase decades of economic growth. For this reason, New Zealand strongly supports the ASEAN Regional Forum as a process for promoting regional stability. New Zealand sets great store in collective security efforts because a small country like ours cannot defend itself alone, and is dependant on a stable, peaceful and prosperous region for its economic well-being.

Returning to bilateral ties, I am delighted there has been a growing interaction between our two countries in the past few years, with a number of high level visits.

Philippines/New Zealand Business Councils in each country have been active in promoting trade opportunities. We have initiated regular economic and political consultations at senior officials level. The first of these consultations were held earlier this year.

Over the last few decades we have built up another valuable association through the development cooperation programme. Many of your young people have studied in New Zealand. We have also had a long association in the geothermal energy and forestry sectors. The forestry development project in Bukidnon remains the largest project in our programme.

In New Zealand, the Filipino community of about 10,000 has made an important contribution to the social, cultural and economic life of this country. We see this in a particularly colourful way during our Festival of Asia which is held every two years at a variety of locations throughout New Zealand .

But I would have to say that there is still work to be done in developing the relationship between our two countries. There is potential still to be developed. We would welcome a larger number of Filipino private students at our universities, a greater number of tourists from the Philippines, and more joint ventures between our companies. New Zealand has a reputation as a "clean, green" food producer, and as a supporter of sustainable development in the Philippines. This is a good basis on which to develop business opportunities in goods and services. We should also be thinking in terms of joint ventures in the Philippines aimed at third country markets.

Last month we welcomed to New Zealand a special guest from the Philippines - your Vice President, Gloria Macapagal-Arroyo. She was one of the senior women politicians who addressed the APEC Women Leaders Network meeting, and then stayed on for a bilateral programme, during which we were able to show her some of the work we are doing in the social welfare field. This was especially interesting to her in view of her responsibilities here in the Philippines.

Mention of the Women Leaders Network Meeting brings me to the main theme of my speech today - the role of APEC in building healthy market-based economies. I know that the Secretary of the New Zealand Ministry of Foreign Affairs an Trade, Richard Nottage, had the pleasure of addressing you when he visited in March so you'll be familiar with what we're working to achieve in APEC this year.

First and foremost, we want to reinvigorate growth in the region, and it must be sustainable growth. This is critical to the prosperity and well being of all our people. To do this, we need to expand opportunities for people to do business throughout the region, strengthen the functioning of markets in the region, and reinforce the capacity of institutions and human resources in the region to deal with the economic challenges they face. If APEC is to continue with its good work, there is also a pressing need to build broader support for it among the wider community.

I'd like to take this opportunity to update you on the good progress that we've been making in each of these areas. We were especially pleased with the outcomes from the recent meeting of APEC Trade Ministers in Auckland in late June.

Expanding opportunities for doing business throughout the region

Expanding opportunities for people to do business is all about opening markets and keeping them open, reducing barriers to trade and investment and eliminating red tape.

When they met last year in Kuala Lumpur, APEC Leaders emphasised the role of open markets in restoring confidence and economic growth in the APEC region. Empirical research supports this view. A recent IMF study of 110 developing countries for the period 1985-95 found that countries with open trade positions, stable macro economic policy settings and relatively small government tended to grow faster.

APEC members also recognise this and have agreed to take individual actions to open their markets. The Philippines, for example, has made significant progress in reducing its tariffs. Under the Tariff Reform Program, which aims to cut tariffs to a uniform rate of 5 per cent by 2004, the average applied tariff has fallen from around 30 per cent in the late 1980s to about 10 per cent. New Zealand has also been busy cutting tariffs. Our average tariff has fallen from around 11 per cent in the late 1980s to just over 3 per cent (note: this is the average as at 1 July 2000). By 2006 all tariffs in New Zealand will be eliminated, 4 years ahead of the Bogor target.

Collectively, APEC members are working to eliminate red tape and make trade easier. By the end of 1999, for instance, most APEC members will have automated their export and import customs clearance procedures. This will speed up the process of customs clearance and reduce the associated costs. Other initiatives, such as the recently established homepage providing answers to the most frequently asked questions about customs arrangements, also make it easier for you to do business with the Philippines Bureau of Customs. Studies suggest that the gains from these types of initiatives are considerable and may outweigh the gains from opening markets by a factor of about two to one. APEC Ministers will consider in September options for broadening and deepening APEC's work in this area.

At the global level, APEC Trade Ministers have called for the third meeting of the World Trade Organisation Ministerial Conference, to be held in November at Seattle in the United States, to launch broad-based negotiations to further liberalise global trading arrangements. In Auckland, APEC Trade Ministers agreed that these negotiations should address industrial tariffs and be concluded within 3 years. APEC members are also working together to promote an early agreement in the WTO to eliminate tariffs in the following sectors: fish; forestry; environmental goods and services; energy; toys; gems and jewellery; medical equipment; and chemicals. Other suggestions for liberalising global trade will be discussed by APEC Leaders when they meet in September.

But just because APEC is suggesting tariff negotiations be taken up in the WTO doesn't mean that APEC has lost its tariff reduction vocation. Quite the contrary. APEC economies need to do more to demonstrate that they are working towards APEC's goal of free and open trade and investment by 2010 for industrialised economies and 2020 for developing members. Updated individual action plans (IAPs), to be submitted by August, should be comprehensive, more transparent, easy to read, and should respond to business concerns. Further suggestions for improving members' IAPs will come from an independent review of them which PECC will complete in August.

Another important area of focus for APEC is on the APEC Food System. Efforts to build a robust regional food system that better links food producers, processors and consumers are of particular interest to the Philippines given the importance of agriculture development. The work under way calls for parallel action in the areas of rural infrastructure development, dissemination of technological advances and promotion of trade in food products. These measures, in the most highly protected and least efficient sector in the region, are of critical importance. They will

- ensure that APEC members are well-positioned to meet rising food demands;

- help us to realise the full gains from APEC's free and open trade and investment goal. For example, it is estimated that more than 50 per cent of the gains from opening markets in APEC economies will come from opening agriculture markets;

- help to address poverty and income distribution issues, within and among APEC economies.

Strengthening the functioning of markets

Opening markets and keeping them open is an essential factor in promoting sustainable growth. But no less significant - as illustrated by the events of the economic crisis - is ensuring that those markets function effectively. This is the rationale behind APEC's work to strengthening the functioning of markets, especially financial markets.

New Zealand hopes that this work will provide a framework to assist APEC member economies with the process of structural reform. Micro-economic reform is necessary to ensure competitive effective marketplaces for business to operate within, which takes into account the interests of both producers and consumers.

As a first step, I will be proposing that Leaders endorse a set of competition and regulatory principles when we meet in September. These principles will stress the need for markets to be open, transparent and well governed. I see such principles as forming an economic policy "toolbox" - a set of policy approaches which economies can use in developing domestic regulatory policy in what is an increasingly globalised economic environment.

New Zealand has some experience of transition from a highly regulated economy to an open economy based on general competition principles. This experience may be of interest to other APEC economies.

As a second step, APEC is working to strengthen financial markets. There are moves afoot in the G-7 and elsewhere to reform the global financial system. Given APEC's unique membership and experience, New Zealand as Chair will want to ensure that there are opportunities for contributing our region's concerns to the debate. But the real issues lie at home. More than anything else, the stability of the global financial system will flow from policies and practices in our domestic economies. The critical task here is for APEC members to work together to strengthen domestic financial markets including by improving bank supervision and corporate governance in the region.

It is hoped that these initiatives can contribute significantly to APEC's ongoing work on economic and technical cooperation or ECOTECH. This is a critical area of APEC's work for many developing members. Often governments in APEC agree on the need for reform but they do not have the means to implement it. For example, a government may wish to put in place a competition law but they may not have the expertise to design a competition authority or the lawyers and economists to staff it. More and better trained bank supervisors are needed to improve bank supervision in the region.

ECOTECH work within APEC, therefore, is about building the human capacity and economic institutions needed for reform. New Zealand hopes that the strengthening markets initiative will provide increasing focus for this work.

Broadening support

The benefit of APEC's work for business and consumers - to all of society's citizens in fact - is immense. But some critics remain unconvinced and other people feel excluded from the process. Broadening support for APEC is critical if we are to ensure its continuing effectiveness.

It is incumbent upon us, as community and business leaders, to ensure that our constituencies identify the link between APEC and positive economic developments. New Zealand is fully committed to building broader support for APEC among the wider community. We've established consultative networks with key groups in our communities, and we're looking at ways to involve them in the APEC process in a meaningful way.

Many APEC members have done quite a lot of work on this, but there is always room to do more. The media also has an important role to play in representing serious policy issues to the public. Business too needs to be active in explaining the role of international linkages in securing growth, prosperity and jobs.

As APEC Chair we are running an extensive programme of domestic outreach on the benefits of APEC. There are also a number of events throughout the year designed to contribute towards the domestic outreach activities of other APEC economies.

I want to encourage you today, as members of the Philippine Business Community, to join New Zealand in finding new ways to broaden support for APEC within the Philippines and across the region.


We in APEC are all joined in a common endeavour. APEC is a process which seeks to facilitate the development of healthy market-based economies amongst roughly half the world's population and half the world's economic activity.

All APEC members share the same interest in ensuring we all move down the path towards renewed sustainable growth and prosperity. We need to work together to: - open markets and keep them open, including through the WTO; ensure that markets, when open, function effectively; and to communicate the benefits of open markets for the prosperity, security and stability of all our peoples.

Given the importance of APEC and open markets to the prosperity of us all, I am confident that we will rise to the challenge. I look forward to working closely with you to advance the cause of open markets bilaterally, as APEC Chair for 1999, and in the WTO.