The University Of Lima

Auditorium, Universidad de Lima, Lima, Peru

I am honoured to address this distinguished gathering.

My visit to Peru, the first by a New Zealand Prime Minister, has brought home to me how much we are neighbours.

Despite the geographical distance between us, and the rich linkages we have with other countries and cultures, we are both Pacific Rim nations.

The same Pacific waves that meet the shores of Peru also break on the islands of New Zealand.

And in recent years those waves have become economic and political as well as physical in nature. The ripple effect of the economic downturn that commenced in Asia in 1997, and spread outward to affect economies around the Pacific Basin, is a case in point.

Simultaneously, the countries of the Asia Pacific region are drawing closer together. We are building institutions of common interest, which in turn reflect and reinforce the policies and values that we increasingly share.

I believe that in the next decade we will see emerging more strongly than ever before a sense of Asia Pacific community that will be both a powerful and positive influence for all those involved. It is that vision - and the contribution of APEC to achieving it - that I want to talk about this evening.

I also want to touch on New Zealand's experience of economic reform – and how domestic policy changes have reinforced our engagement with the international economy.

The Asia Pacific Economic Co-operation process, or APEC, has emerged over the last ten years as the pre-eminent economic and political grouping of the Asia Pacific region.

New Zealand places great value on the Pacific Rim nature of APEC.

We warmly welcome the participation of Peru, one of APEC's newest members, with whom we share much in our approach to economic reform and trade.

In my discussions with President Fujimori it has been very clear that membership of APEC, for both Peru and New Zealand, is already enhancing our economic and political relationship.

We have in common our strong record of unilateral reform to liberalise markets, and our pursuit through the World Trade Organisation of an open, liberal and rules-based international trading system.

APEC is, I'm sure to many, a mysterious acronym. I see APEC for what it is: a unique grouping which comprises:

• 60% of the world's GDP;
• the world's two largest economies: the US and Japan;
• several of the world's most important developing economies – including China and Indonesia;
• industrialised and developing economies on both sides of the Pacific;
• the only grouping which brings together annually the governments, business sectors and Leaders of the Asia Pacific around a common purpose of building greater links between their economies and peoples;
• the only grouping which has set itself a goal of free and open trade and investment and has agreed a pathway to achieve it progressively for almost half the world's population.
• Unlike the World Trade Organisation, APEC works through consensus not contract, through encouragement by peers, not enforcement. APEC combines domestic and collective measures to help achieve the growth of enterprise, economies and employment.

And it is the Leaders who set the pace and the direction of progress through their annual Summit meetings.

In 1999, as Chair of APEC, it is New Zealand's turn, and our intention, to move the process further towards achieving APEC's growth and development goals.

That is a challenge we intend to take up with both hands. I look forward to welcoming the Leaders of the 21 APEC economies to New Zealand in September.

We want the 1999 APEC Leaders' meeting to be a significant staging-post for building Asia Pacific prosperity in the new Millennium.

We have set ourselves three themes for this year:

First, we want to expand opportunities for doing business by opening markets throughout the Asia Pacific region.

Globally, trade and investment are engines of economic growth. For the past ten years trade has grown almost three times as fast as the world average. Investment has grown nearly three times as fast again.

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 than countries without those characteristics.

Peru and New Zealand have both taken tough decisions on economic reform in recent years. We share a common belief in the benefits of unilateral liberalisation and I am confident that this will enable us to work together to further the APEC agenda.

Against this backdrop we want to carry forward the emphasis which APEC Leaders at Kuala Lumpur placed on maintaining the long-term APEC goal of free and open trade and the vital role of open and sound markets in restoring confidence and economic growth.

New Zealand has already signaled its intentions. We will achieve full tariff elimination on all goods by 2006; four years ahead of the APEC target for industrialised economies.

In November the United States will host the third meeting of the World Trade Organisation Ministerial Conference.

That meeting will debate whether and when to launch further multilateral trade negotiations in the WTO. Its outcome - one way or the other - could have a profound influence for the evolution of APEC and the global economy over the coming years.

APEC, because of the size, diversity and significance of its membership, has a particular responsibility to support the multilateral trading system and to challenge others to join with us in strengthening it.

The September APEC Leaders' Meeting in Auckland is an opportunity for Asia Pacific Leaders to speak on how they wish to see the global trade system develop in the new Millennium.

As Chair we will be working to give Leaders just that opportunity.

APEC is also studying a proposal for an APEC Food System to be established. This proposal is essentially directed at making regional agricultural markets function more effectively, and strengthening the links between producers, processors and consumers of food.

Studies indicate that more than 50 per cent of the gains from APEC liberalisation will come from agriculture liberalisation. Furthermore, reforming food and agriculture policies in the region is critical to addressing food security, poverty and income distribution issues, within and among APEC economies.

This proposal is of key importance to all of us.

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 financial crisis - is ensuring that those markets function effectively.

This is the aim of New Zealand's second theme as APEC Chair for 1999: strengthening the functioning of markets.

Work is focused particularly on human and institutional capacity building in the financial sector. We want to assist the emergence of governance skills; prudent structures and information flows that can help restore confidence in regional financial markets.

New Zealand is also sponsoring the development of APEC principles on competition and regulatory reform. I compare this work to an economic policy toolbox - a set of policy approaches which economies can draw on in developing regulatory policies which can foster investment and sustainable growth.

New Zealand has moved from being a highly regulated economy to an open economy based on general competition principles. Peru has also had considerable experience of regulatory reform and deregulation.

Both of us have seen the success and the challenges of change. We are each well placed to share these perspectives with other APEC members, and draw, in turn, on the lessons they have learned.

One of the lessons of the 1997 financial crisis was that economic growth won't be restored until markets regain confidence in the transparency and strength of financial sectors of the affected economies. Financial markets, as for markets in general, need to be open, transparent and well-governed if we are to see a return to sustainable economic growth.

APEC's work on developing better regulatory and oversight structures is therefore directly relevant to regaining growth and confidence in the region. By sharing experiences and pooling expertise, APEC can contribute to improvements in the regional economic policy environment to the benefit of all our economies.

New Zealand's third theme for APEC 99 is one of building support for the APEC process.

Global markets, mass media, and the Internet are simultaneously creating greater awareness, debate, and uncertainty about the benefits of trade and investment.

If APEC is to enjoy the public and political support necessary for achieving its goals then we must convince our public of the benefits of trade and investment.

We all have a role to play. We have to prove to our voters that the APEC process really will put more money in their pockets – improve their long-term prosperity.

That is our challenge for 1999. I invite Peru to share that challenge with New Zealand.

As governments we have a responsibility to encourage informed public debate and participation in these areas.

The media too face the challenge of how to present this valuable but complex co-operation between APEC nations.

Business in turn needs to be active in explaining the role of international trade and investment in securing jobs, profitability and expansion.

We will be working in 1999 to engage with the public, media and in particular the non-governmental sector to deepen the quality of advice on and understanding of APEC's trade, growth and development work.

New Zealand was among the founding members of APEC. Peru joined more recently. Together through the APEC process we seek the development of strong market-based economies amongst roughly half the world's population and over half of the world's economy.

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

• markets and keep them open;
• ensure that markets function effectively and fairly;
• and communicate the benefits of open markets for the prosperity, security and stability of all our peoples.
• Domestically, as well as internationally, can act to secure increased growth and greater prosperity for their people.

We have watched with admiration the gains that have been made in this area by Peru in recent years.

New Zealand, in its own way, has also sought to reinvent the role of government.

In the early 1980s we had become a textbook case of how not to run a modern economy.

We had frozen, fixed or frightened all the main indicators of the New Zealand economy. Wages, rents, exchange rates and interest rates were all controlled.

Through subsidies we were picking winners but losing innovation.

Since then, successive governments all along the political spectrum have set New Zealand on the path to a different future.

If there is a main theme behind our experience, it has been to dramatically improve the transparency and accountability of government to taxpayers.

We cut subsidies and industry protection across the board. We want business skill, not government protection, to drive investment. Today it does.

We pursued comprehensive taxation reform, reducing personal and business tax rates and introducing a broad-based value-added tax.

We pursued wide-ranging trade policy reform – to support our consumers and business people with access to the world's best products at world prices.

We introduced a right for workers to negotiate their own conditions and rewards for work, subject to protection from abuse by employers. This has dramatically improved the flexibility and productivity of the New Zealand labour market.

We set our monetary policy to guarantee stable prices, underpinned by a robust and independent Central Bank.

And we have focused the Government and its agencies on achieving defined strategic priorities such as lifting educational standards, strengthening families to break cycles of disadvantage, and increasing New Zealand's external links through liberalised trade, investment and immigration.

It has not been easy, but our reforms have delivered solid results.

We have moved from continual government deficits to surpluses. We have halved our net public debt as a proportion of GDP in eight years.

We have reduced unemployment by over a third, and we have increased the robustness of the New Zealand economy to handle such shocks as the Asian financial crisis.

I don't claim for a moment that we've got it all right.

But if you ask most New Zealanders whether they would like to go back to the days of limited choice, economic controls and an inward-looking, high-inflation, high-cost economy, the answer is a very resounding no.

Moreover, one of the real benefits of our reform process is that it has drawn New Zealand, and New Zealanders, much closer to the Asia Pacific region – the region we share with you.

In that sense, domestic reform and the APEC process are mutually consistent, and self-supporting.

I spoke at the outset of a sense of community emerging around the Asia Pacific Basin as we enter the new Millennium.

Through APEC the Leaders and Ministers of countries around the Basin are getting to know each other, while our officials and private sectors are increasingly engaged in the promotion of new ideas, of problem solving and co-operation.

My visit to Peru for APEC consultations, and President Fujimori's visit to New Zealand last year, are but a small sign of how we as two countries are drawing closer together.

I am a strong believer that economic interdependence and sensible reforms, underpinned by personal relationships and friendship from the leadership level down, are the best guarantor we have for peace stability and prosperity for our people.

I hope that all of us, in our respective ways, can work together to build that sense of community around the Asia Pacific region.

New Zealanders look forward to forging closer links with Peru as we do so.