Asia Pacific Network (AP Net) dinner

Grand Tearoom
Heritage Hotel
Auckland

Thank you for the opportunity to provide an overview of the recent APEC meeting I attended in Hanoi, and to preview briefly, my attendance next week at the second East Asia Summit in Cebu, in the Philippines.

The Leaders’ Summit is an extremely important annual fixture for me as Prime Minister, and the Summit in Hanoi was the seventh I have attended.

For those of us from the Vietnam War generation, it is of special significance to see Vietnam emerge as the confident host of an APEC meeting which brings together nations representing political systems across the spectrum.

Vietnam has for a number of years been pursuing a more open economy and reforming many of its internal laws and regulations. There is a confidence and vibrancy about 21st century Vietnam and its economy. Its hosting of APEC, together with its recent acceptance into the WTO as the 150th member nation, is symbolic of the transformation Vietnam has undergone and is continuing to undergo as a nation and as an economy.

APEC membership without doubt has played its part in Vietnam’s transformation. APEC supports nations wanting to deepen their economic and political links, participate in capacity building activities, study ‘best practice’, and enhance regional engagement.

At each year’s APEC new themes come to the fore. Last year there was an intense focus on stepping up regional co-operation to deal with the risk of an avian influenza pandemic. Members also undertook the ‘Mid-Term Stock Take’ on APEC’s progress towards its Bogor Goals. Improving regional resilience and preparedness for natural disasters against the backdrop of the tragedy of the 2004 Boxing Day tsunami, also featured.

The backdrop to this year’s APEC was a focus on:

·the suspended WTO Doha Round negotiations;
·the increasing number of regional institutions, multilateral FTAs, and ever increasing bilateral FTA activity in the Asia Pacific;
·North Korea’s extremely concerning 9 October nuclear test.
·In addition, I was keen to see APEC do more in the field of climate change, and that also became a focus of discussion.

I will touch on each of these issues individually.

There was a consensus among APEC leaders that the Doha Round remains the region’s top trade priority, and there was deep unease about the suspension of the negotiations. The general sentiment was that the basis for a resumption of the talks at ministerial level was better offers being made by all key parties. Re-engagement is seen as unlikely if the starting point is simply the previous departure point. That was on the table in July, and is acknowledged as a recipe for failure. APEC Leaders issued a separate statement on the Doha Round, recording a joint commitment to “move beyond existing positions”. That commitment, acted upon within APEC and matched by others outside APEC, could move the Round forward.

The test will be to see whether the statement translates into action in the form of new instructions to negotiators in the period ahead. I am pleased that the negotiations have resumed at a technical and working level, and that officials are again gathering in Geneva and testing the ground for a way forward.

While the window of opportunity has been closing on the Doha Round, there is some comfort to be drawn from the discussions at APEC and the commitment Leaders gave that those representing sixty per cent of the world’s economy are still looking to secure a good result. A good result overall would be one which offers real improvements in market access to world markets for both agricultural and non-agricultural products, and effective cuts in trade distorting domestic agriculture subsidies. We will have a better sense of how things are looking in the New Year.

The second major issue at this year’s APEC related to the question of how APEC should respond to growing forces, in the region, pushing for greater integration.

After a period of relative stability in the region’s trade and economic architecture, where APEC has enjoyed a position of some pre-eminence, new arrangements are emerging which could be rivals to it or could be complementary.

For example:

·the East Asia Summit has emerged as a new regional institution,
·new regional FTAs are being mooted – such as a possible ASEAN+three endeavour ,or a Japan/India sponsored proposal involving sixteen countries. The latter would have the same membership as that of the East Asia Summit,
·bilateral FTA activity continues to accelerate.

APEC has done much useful work around capacity building, developing ‘best practice’ chapters for FTAs, and promoting initiatives on behind-the-border reforms and on the ease of doing business. Now these non-APEC regional developments are a wake-up call for APEC itself. It must now operate in a more contestable environment for ideas and initiatives, and will need to adjust and respond to that to remain relevant, as I am sure it can.

APEC’s Business Advisory Council (ABAC) has for several years been promoting the idea of an APEC-wide FTA, as have New Zealand and a few other smaller economies within APEC. We have promoted it both as a means to respond to the proliferation of bilateral FTAs in the region and, more broadly, to help keep APEC’s open trade agenda alive and purposeful. Up until this year, the Free Trade Area of the Asia Pacific (FTA-AP) concept was very much seen as an ‘idea before its time’. Most APEC leaders had not been prepared to see it form part of APEC’s formal agenda.

This year, however, the FTA-AP concept came in from the cold with the United States giving support to its development for further consideration for the first time.

The FTA-AP is now squarely on APEC’s formal agenda. We may in future years look back on this decision as a turning point on the pathway to greater trans-Pacific integration. Leaders instructed officials to undertake further studies on ways and means to promote regional economic co-operation, including through a Free Trade Area of the Asia-Pacific as a long term prospect, and to report to the 2007 APEC Economic Leaders’ Meeting in Australia. Next year’s discussion in Sydney will enable us to elaborate further on the idea.

A commitment to do this in no way detracts from the need to advance the Doha Round, which must remain the top and immediate trade policy priority. But we would be short-sighted not to see the potential of a trans Pacific agreement for us, covering, as it would, fourteen of our top twenty markets.

New Zealand like other APEC economies has been busy on bilateral FTAs. Since our government came to office, we have entered into bilateral free trade agreements with Singapore and with Thailand; and into the trans-Pacific FTA with Singapore, Brunei, and Chile – which is also open for others to accede to.

As well, we are currently in FTA negotiations with China, Malaysia, and all of ASEAN.

The China negotiations have been through their ninth round, with reasonable prospects that New Zealand will be the first developed nation to enter an FTA with China. This follows our being the first nation to conclude a bilateral WTO accession agreement with China, the first to recognise China’s market economy status, and the first Western nation to enter FTA negotiations with China. As the country of the three firsts, we are well positioned for the fourth.

And we are convinced of the benefits for us. Ours is an open trading economy, with around ninety five per cent of goods by value entering free of tariff. Considerable barriers, however, greet many of our products going the other way to China.

For China, the benefit of concluding an agreement with New Zealand will be in the demonstration effect of showing that it can enter such agreements with developed economies.

The third major preoccupation at this year’s APEC was North Korea.

APEC has not traditionally addressed nuclear proliferation issues, and there is some sensitivity involved in venturing into this territory. That said, given North Korea’s provocative and destabilising 9 October nuclear test, it was inevitable that the issue would be discussed. A special Foreign Ministers’ meeting was held at APEC to discuss the matter. And, at the conclusion of the Leaders’ Summit, Vietnam’s President, as APEC Chair, issued a statement expressing the membership’s strong concern about the nuclear test. We stressed the need for full implementation of the relevant Security Council Resolutions and emphasised our strong support for the resumption of the ‘Six-Party Talks’.

In my view, APEC’s ability to respond to topical issues which threaten stability, growth and development, helps maintain its relevance as the region’s pre-eminent organisation.

A major issue promoted by New Zealand at this year’s APEC was climate change. Growing awareness of the scale of its impact on economic growth makes it imperative that APEC takes the issue onto its agenda. The way in this year was through reference to APEC’s work on energy efficiency, energy security, and alternative energy sources. We can build on this, and encourage further efforts by APEC economies which complement those under the United Nations Framework Convention on Climate Change, and the Kyoto Protocol.

APEC’s membership includes many of the world’s largest energy producers as well as many of its most significant CO2 emitters. It bridges the North-South divide which sometimes makes progress in the UN difficult. New Zealand’s interest in APEC doing more on climate change was shared by other Leaders at the Retreat. We concluded our discussion by instructing Energy Ministers to report back next year on ways in which APEC might further contribute to climate change objectives, by pursuing policies and technologies to produce cleaner energy and more energy efficiency.

APEC meetings are also valuable for the opportunities created for bilateral meetings – and twenty five of those were conducted by me as your Prime Minister and by our Trade and Foreign Ministers in Hanoi.

I attended a meeting involving the Leaders of Singapore, Chile and Brunei to celebrate the coming into effect of the trade agreement between our four countries, and to consider how to take it further. I also had formal meetings with Canada’s new Prime Minister, Stephen Harper, and Malaysia’s Prime Minister Abdullah Badawi.

I had the opportunity to discuss with President Bush areas where New Zealand and the United States are working together, to update him on developments in the Pacific, and to invite him to visit New Zealand when he is in our region for the APEC Summit in Sydney next year.

Holding APEC in Australia brings it full circle. APEC was, in the first instance, an Australian initiative and an insightful and successful piece of regional diplomacy. The very first APEC meeting was held in Canberra in 1989, and involved a gathering of twelve Foreign Ministers. APEC today encompasses 21 economies, and involves a wide range of Ministerial meetings, as well as the Leaders’ level Summit.

Next week I go to the second East Asia Summit in Cebu. Participation in the Summit as a foundation member in Kuala Lumpur last year was a significant milestone for New Zealand in its relations with Asia. New Zealand hopes the EAS will contribute to the building of a stronger sense of community throughout East Asia.

Energy issues will be a priority topic for the Cebu meeting, along with education, finance, avian flu, and disaster mitigation and preparedness. Other topics, such as the Doha Round and recent developments in North Korea, are also likely to be discussed.

Leaders will also look at the role of the Summit in the regional architecture, and how to identify for its work a set of issues which both fit with its geographic footprint and complement the work of existing structures, such as APEC.

Given the interest in New Zealand’s trade in this network, I want to mention Export Year 2007 before concluding. Export Year is all about improving our long-term export performance which is so critical to New Zealand’s future prosperity. New Zealand needs more globally competitive, high value firms which can help us increase our export returns.

To kick-start Export Year, I announced last week a $33.75 million boost to the Market Development Assistance Scheme which supports exporters breaking into offshore markets.

While the government has an important role to play, boosting export performance depends vitally on decisions made in the private sector. In an early export year initiative, fifty exporters and CEOs met in Auckland last Friday to brainstorm on what the business sector itself can do to lift export performance.

Overall Export Year provides many opportunities for business-to-business and business-to-government collaboration around our common goals .

Our relationships in Asia will play a big part in enabling us to reach those goals. Within the next twenty to twenty five years, China will become the world’s largest economy, overtaking that of the United States. India on current projections will not be far behind. With economic might comes regional and global influence. While the twentieth century belonged to the US and Europe, the twenty-first century will probably belong to Asia. Our participation in and commitment to Asia-Pacific regionalism places New Zealand in a strong position to benefit from the region’s growth and development.