NEW ZEALAND - UNITED STATES ON THE SAME SIDE

New Zealand and the United States have much in common.

We share similar values.

We cherish democracy.

We seek world peace and stability and we promote human rights.

We support liberalisation of the world's trade and economic systems.

We stand together on many issues in many settings, and will continue to do so.

Internationally, we share an innate sense of fairness that, time after time, has led us both to seek greater equity outside our borders in the defence of international order.

Peacekeeping operations in Bosnia, and the Multinational Force in the Middle East, are but two examples of where our service personnel have worked alongside each other in keeping and building peace in the world's trouble spots.

None of this is to suggest that we always see eye to eye.

On the contrary. The mark of democracies the world over is that, from time to time, their peoples will arrive at a range of conclusions reflecting their particular circumstances that are different from those held even by close friends.

New Zealanders' deeply held views on nuclear weapons are a case in point. The "unfinished business" over nuclear policies has constrained defence links with the United States since the mid-1980s.

Nevertheless, we have been able to maintain and build co-operation in a number of areas, and move on.

New Zealand's contribution to regional and global security, and the recent commitment we have made to restoring the capabilities of the New Zealand Defence Force, have helped underpin some restoration in defence and security relations with the United States.

We value those links, particularly where they enable our service personnel to work and train alongside counterparts from other countries.

We shall continue to welcome such opportunities where they support and enhance our common interests and goals.

In trade, as well as in diplomacy, we are both active in pursuing an open rules-based system of international commerce. Our shared environmental values have also led us to work together in areas ranging from climate change to the conservation of Antarctica and positive gains have been made.

In the economic area our relationship is overwhelmingly positive. Having said that, there remain some delicate points of difference.

From a United States perspective, the role of PHARMAC, and our decision on parallel importing, are the cause of some unhappiness.

From New Zealand's point of view, tariff barriers to some of our exports, notably dairy products, and the continued use of export subsidies in the United States, cause us some frustration.

We do not welcome these differences. We keep them in perspective. They are signs of two economies that are increasingly intertwined with each other. The higher the level of economic interaction, the more scope there is for trade policy debate.

The issue is to keep our collective eye on the main game - and that is the importance of the bilateral relationship and the enormously productive partnership we have with the United States on global trade and economic issues in such groupings as APEC and the World Trade Organisation.

You in the American Chamber of Commerce already know just how important those links are.

The New Zealand-United States relationship is strong enough to weather some differences. As a sign of the warmth of the relationship, I look forward to welcoming US Secretary of State Madeline Albright here. I welcome the opportunity for high level discussions with her which will present a chance to advance important matters of mutual interest. On a personal note, I am also looking forward to meeting one of the leading and most dynamic female political figures in the world.

As we in New Zealand look around us, we acknowledge that we have enjoyed immense benefits from closer links with the Asia Pacific Region. We have been inclined to look west, to Asia, but recent visits here by the Presidents of Argentina and Peru brought home to us the growing trade, tourism and investment opportunities to the east as well. It's in our interest to develop those opportunities, and the Government is actively planning new initiatives in this area.

We will also benefit from reminding ourselves that economic cycles are a part of life. Asia will recover because its people have the skills, education and determination to make that happen.

The key questions are:

are we at the bottom of the downturn
what needs to be done to rebuild confidence in the Asian economies
do governments have the will to take the necessary steps
The world watches Japan as we wait for answers.

At the same time, the key point New Zealanders must remember is that we can trade our way through this, regardless of international politics. In recent weeks at home and internationally there are signs that people are coming to terms with the economic uncertainty and getting on with business.

Thankfully, the New Zealanders I am proud to lead are able to think smart, and act smart, to the benefit of us all.

Already there is evidence of our exporters shifting to new markets, and even in some of the contracting economies, we are increasing our share.

We have just received the figures for exports for the 12-month period to May 1998. They confirm the downturn in Asia. Exports to the main Asian economies decreased by $402 million.

However, over the same period there was a $420 million increase in New Zealand's exports to the United States.

The increase in our exports to the United States has totally made up for the loss in Asian export markets and that is to the credit of our producers.

Smart performances and strong leadership will continue to be required, as the winds of change continue to blow through Asia.

The United States leadership is appreciated, especially the role the US is undertaking in supporting adjustment and financing programmes for a number of Asian countries.

Our hope is that such leadership, underpinned by an open growing domestic US economy, will continue over the coming years. We would also welcome the US leading the way into a new round of multi-lateral trade negotiations, armed with a new fast track trade negotiating mandate.

Here in New Zealand, if we want to keep the gains and continue economic growth, we must keep our own house in order.

We are already responding responsibly. Our strategy is two-tiered - developing both a short-term and medium-term response that will enable New Zealand to:

weather a storm of uncertain duration
resume a sustainable growth path as external conditions improve, and
enhance the environment in which producers and exporters can succeed.
It is important we provide a further buffer against the Asian economic downturn, and we are making good progress towards achieving the $300 million savings.

The fiscal surplus is one of New Zealand's prize assets, and we must be seen to take sensible steps to protect it in the short-term and, more importantly, to strengthen our medium-term fiscal position.

We're not simply reverting to short-term fiscal fine-tuning. We must run our economy as efficiently as possible so that business will be in the best position to ride out the storm and recover as markets improve.

We have said that until our net debt is below 15 per cent of GDP we must aim to maintain a surplus.

All cabinet ministers are contributing to a set of moderate and sensible measures. When the savings are announced by the Treasurer next week I am confident New Zealanders will see that we have been able to responsibly balance fiscal requirements while still meeting our social goals.

As we consider our options we are able to take advantage of the three year planning process that the National-New Zealand First Government has devised. In each of the last two Budgets the Treasurer has clearly signalled expected areas of future spending, and the contingency fund set aside for those areas. We are now reviewing some of those plans, as we look to make savings.

At the same time, we are continuing with the policy programme set out in the Budget that will reduce costs to business, and we are also making good progress with looking ahead to what further steps we can take after we receive the next full economic forecasts in late August or early September.

The National-NZ First coalition is proving that it has the skills and commitment to take a sensible approach to managing these testing times. We recognise that political stability is critical.

Even with the political events of yesterday, the Government is still stable, with a majority in parliament, and I am confident I will be able to continue to provide strong, stable leadership. There are always options. I can assure New Zealanders that the test will be how each option would serve the country's best interest.

There is widespread speculation about whether the make-up of the current political environment will change. Those are matters for the future and the options are as varied as the hair colour of the gallery correspondents doing the speculating.

I remind New Zealanders of the number of different permutations of parties we saw in the three years before the last election.

I'm sure you also remember that it was National that continued to provide stable government throughout that period, and I am confident that the skill and experience of my National team will continue to stand us in good stead.

Having said this, the nature of MMP is that, despite a sound policy framework, there will, from time to time, be events which create political uncertainty. That is the nature of coalition government, and despite the distraction, these events need not erode investor or public confidence in our country and the positive future ahead of us.

This Government's achievements are in stark contrast to any of the other parties on the political scene at the moment. Labour's only contribution to the current economic debate is to indicate they will spend a great deal more and put up tax. This will hurt New Zealand, not help us. It would knock the stuffing out of the economy and penalise hardworking New Zealand families.

I note the American Chamber of Commerce, in a recent report, sees some obstacles to foreign direct investment. I remind the Chamber that politics is the art of the possible. I simply ask what you think foreign investors would make of the alternative - a Labour-led coalition including the Alliance's "fortress New Zealand" mentality would be openly hostile to foreign investors and their capital.

The National-New Zealand First Government is outward-looking and actively engaged in the international community.

We will be working closely with our international neighbours when we take over the APEC chair at the end of this year.

That will lead to the largest conference ever staged in New Zealand when the APEC summit is held in Auckland. We must quickly get our minds around the sheer size of APEC, which involves us hosting our 20 Asia-Pacific neighbours.

We will see in Auckland United States President Clinton, Russia's President Yeltsin, the People's Republic of China President Jiang Xemin and other leaders, representing more than a third of the world's population.

The opportunities APEC offers not only Auckland, but all New Zealand, are simply stunning as the world's media looks our way. We need to be ready to showcase ourselves to the world. It is the opportunity of a lifetime.

New Zealanders are rightly proud of this cheeky little country that makes an impact far beyond its size. The challenge is to avoid becoming bogged down by what is something of a national tendency to focus on the negative, when there is so much going on that is very positive. This is true about issues in New Zealand and on the international stage.

There is an important role for the American Chamber of Commerce in New Zealand to play.

Besides APEC, next year the World Cup in golf, the World Netball Championships, and the Americas Cup, are all happening here and we also hope to bring the World Rugby Cup home.

The Millennium also offers New Zealand a chance to focus the world's attention as the first country to welcome the new dawn. We're the first to the future.

We need to plan.

We need to promote.

We all need to get involved.

We will lead!

This is a smart country with bright, innovative people.

1999 is going to be our year.