Staying Engaged with Asia

  • Lockwood Smith

ASEAN New Zealand Combined Business Council
Northern Club

It is probably becoming a little fashionable for some to say "I told you so" about Asia. Certainly Asia has some big problems. Those who have been concerned for some time about the close links between government and business, the over-investment in prestigious property projects and the liquidity of banks have been proved right. But for the most part, Asian economies are making the reforms necessary for recovery. Asia continues to be a valuable market, right now and in the future. And I remain confident that the 21st Century will be the Asia Pacific century. It's critically important we remain fully engaged with the region, our neighbourhood.

The formation of this ASEAN New Zealand Combined Business Council is a sensible step. It recognises the increasing integration of the ASEAN economies, through AFTA. What's more, especially in a time of tight resources - and with limitations on time - it makes sense to bring together the various bilateral councils into one grouping. Combining the councils means you will have greater opportunities to network. My thanks to Brian Slater and the chairs of the bilateral councils for their work in bringing the new combined council together.

The Government will obviously work with you through whatever structure you believe will best enable you to grow your businesses in South East Asia. I would stress, however, the need for you to explain carefully to your counterparts in Thailand, the Philippines, Indonesia and Viet Nam exactly what you have decided to do and why. It is important our contacts in each of those markets do not make the mistake of believing the formation of the new council implies less of a commitment to the bilateral relationships. The formation of "country chapters" in the combined council should help to avoid any of those concerns.

There are two main reasons why it's valuable for me to be here tonight. First I want to outline to you the latest developments with AFTA/CER and APEC and the Government's strategy to advance free trade. Second, it is important for me to get your feedback on where my priorities should lie as Trade Minister. There's no point in we politicians spending our time on trade liberalisation measures which you don't see as priorities. The beauty of both AFTA/CER and APEC is that they are largely private sector driven. So I want you to think about the areas where my officials and I should put our greatest effort. We're meant to be public servants. We're in your hands.

The AFTA/CER dialogue is valuable to both free trade areas, given that we are one another's closest neighbours. In 1996, AFTA took over 13% of CER's exports, while selling us products worth nearly US$5 billion. Obviously the recent difficulties will have caused these figures to have changed temporarily. But the basic objective of the AFTA/CER dialogue is to find ways to reduce barriers to two-way trade and investment between the two areas, to get those figures to grow further.

The key phrase is "trade facilitation". So far, we have not got into trade liberalisation issues such as the removal of tariff barriers. That's left to APEC and the WTO. The focus has been on removing non-tariff barriers such as unfair quarantine rules which of course can often be more of a problem than more transparent tariff quotas and tariffs. In that respect, Australia came under quite a bit of pressure at last year's meeting in Malaysia.

We're also working on reducing the cost of doing business. A good example is ASEAN's work on standards and conformance. About 24 projects are underway. Right now, we have representatives from ASEAN working at our Measurements and Standards Laboratory. Standards New Zealand is organising a seminar to be held in Bangkok to ensure that future international standards reflect the requirements of ASEAN. Longer term, we will begin work on mutual recognition.

The business sector is fully involved in AFTA/CER's work, and in identifying the priorities. David Truscott's AFTA/CER Business Coordinating Group has been set up to advise the Government on your priorities, and to coordinate with your counterparts in Australia and ASEAN on what you want our work to focus on.

The first stage of that occurred in Malaysia last year when ministers were presented with a list of the main barriers to trade and investment. This year, the work needs to be more focussed. I only have so much gunpowder and I need to use it on the barriers which cause you the most problems. At the next AFTA/CER meeting in October in the Philippines, I need to know which barriers to focus on, and my trade minister colleagues need to know that too. Well before October, I need a handful of key objectives from you that I can put my energies into achieving.

What potentially makes things more difficult for me is the Asian Crisis. Politicians tend to respond in one of two ways to difficulties like the Asian Crisis. Some look inward, become protectionist and disengage from the rest of the world. Others respond by opening up to trade and investment, recognising them as the engines of growth.

In New Zealand - uninformed media comment aside - we are taking the correct path. The Government has reconfirmed our commitment to microeconomic reform in areas such as electricity and car tariffs - two reforms which will put around $400 million a year back into the hands of consumers and business. We will make changes to the implementation of the Resource Management Act, reduce compliance costs and further tariff cuts will proceed. The special statutory powers of producer boards will be removed over time. The $300 million in savings being sought by the Government will reduce pressure on interest rates. You can be assured that I see myself as the exporters' advocate around the Cabinet table.

The jury is still out on how some other Asia Pacific governments will respond in full, but there are positive signals from the jury room. Last month's APEC meeting in Malaysia delivered an impressive result on that score. The message to APEC economies is clear: trade and investment are the engines of growth, and freeing them up is an important step towards recovery.

In Vancouver at the end of last year, APEC leaders agreed to early liberalisation of 15 sectors. Nine were to be finalised this year - including forest and fish products - with the other six - including food - to be worked on in 1999. Going in to last month's APEC trade ministers' meeting to consider the details of the first nine sectors, I feared we would face an uphill battle to make progress. Japan in particular expressed reservations. But the rest of APEC - including ASEAN economies like Thailand and Indonesia facing severe problems, and Korea and China - was united on the need for reform. That gave me particular confidence in the willingness of ASEAN economies and others facing difficulties to implement the reforms necessary for recovery. In the end, APEC committed itself to the liberalisation package, with only the degree of flexibility on implementation still to be finalised in time for the APEC summit in November.

The deals in those nine sectors covers trade worth around $3 trillion a year through the APEC region. It's full finalisation near the end of 1998 will allow New Zealand's year in the chair - 1999 - to be focussed strongly on the next six sectors for liberalisation, including food. If we can make progress on liberalisation of trade in food, the extraordinary disruption that this city will experience next year will be worthwhile - ten times over.

APEC has been described as the biggest trade policy initiative in history. By the end of this year, it will include the United States, Japan, Russia and China. That means that developments at APEC will have a major impact on trade liberalisation globally. Already, APEC deals in information technology and telecommunications have greatly assisted the agreements achieved in those sectors at the WTO. I'm working hard to ensure that those precedents will be followed with respect to forest and fish products.

The APEC work programme - like that for AFTA/CER - is driven strongly by the private sector, through the APEC Business Advisory Council, or ABAC. We want early liberalisation to occur in the sectors which are most important to our businesspeople. ABAC played a major role in the early liberalisation package. I want that kind of business involvement to continue. The private sector should drive the politicians to set more and more ambitious goals.

That's why I am here tonight - to hear what you believe my priorities should be. I have a great deal of confidence in the future of South East Asia, as do you. I look forward to working with you to free up trade between AFTA and CER, and throughout APEC and the world more generally.