What Apec Means For New Zealand Business

  • Dr Lockwood Smith
International Trade

World Trade Club of the Auckland Chamber of Commerce

Suppose that you manufacture the best hokey-pokey ice-cream in the world.

Your expertise and the Government's economic policies mean you can also produce it far cheaper than anyone else in the world.

You do some market research and find, by huge coincidence, that your hokey-pokey ice-cream has huge appeal to consumers in the United States, Japan, China, Russia and all the economies which make up the 21-member APEC forum.

To help bridge our balance of payments deficit, you decide to obtain a licence from the Dairy Board, and start exporting ice-cream from New Zealand.

Sounds like you're on to a winner, but I bet you'll run into some problems.

First, you might find that ice-cream imports are completely banned in some of those hokey-pokey-hungry economies.

Even if ice-cream imports aren't banned, you might face quotas that are so small you can't justify the expense of entering the new market.

There may also be tariffs so that the retail price of your ice-cream is going to be beyond the budgets of local consumers.

But let's say your trade minister does a brilliant job. He gets all APEC economies to lift their import bans and abolish their quotas and tariffs for ice-cream.

You may still face problems.

There might be product standards that differ in each of the 21 APEC economies. You might have to produce 21 different kinds of hokey-pokey ice-cream, or spend time and money showing how you comply with all the different standards.

Once you've done that, you finally put your ice-cream on a ship and send it to your export markets.

When it arrives, you find you have to fill in Customs forms in Double Dutch, and a forest has been cut down to produce them.

The local Customs staff may be uncooperative.

To stop your ice-cream melting, you might even pay for some "assistance", even though New Zealand has signed an anti-bribery treaty.

Despite all this, your ice-cream may end up melting anyway if local electricity and transportation networks aren't conducive to getting ice-cream to the shops.

But then you might find you face local regulations no one can understand, or local accounting techniques that don't seem to follow any known Statement of Standard Accounting Practice.

Let's say you work your way through that mine-field, but you don't get paid.

The local legal system may not have a strong tradition of enforcing contract law.

None of this adds up to a strong incentive to export.

You might decide that helping to bridge our balance of payments deficit isn't quite the priority you thought.

Your particular product may not be ice-cream, but all New Zealand exporters will have faced some or all of these types of problems.

APEC is designed to sort them out.

Government officials and even trade ministers can occasionally be guilty of making APEC sound mysterious.

I've been in the job only a little over two years but already I can become excited about a new sub-committee being established to write a report for an advisory group.

Which will consult with NGOs and make recommendations to a senior officials' meeting.

Which will present options to trade ministers.

Who will prepare agreements-in-principle to be considered by economic leaders.

Who may then decide to refer the issue to a new ad hoc group.

That process is important.

But remember, APEC is fundamentally about raising the standard of living of our people - our communities.

That is only possible if business can grow to create the jobs for our people.

APEC is about making it easier for business to grow - about solving the problems of our ice-cream manufacturer, and similar problems of all other exporters.

It's designed to encourage business in the region by making it easier and simpler.

That's the standard by which it should be judged over the next two decades.

Initial credit for APEC has to go to former Australian Prime Minister Bob Hawke, when it was established in 1989 as an informal dialogue group.

US President Bill Clinton deserves credit for lifting it to the next level when he hosted APEC Economic Leaders at Blake Island, Seattle, in 1993.

For the first time, we had that image of all the leaders together, which lifted APEC's status and importance.

But probably the most important step occurred in Bogor, Indonesia, the following year.

In the Bogor Declaration, the leaders of all APEC economies publicly committed themselves to free and open trade and investment for developed economies by 2010, and for developing economies by 2020.

No import bans that cannot be justified by scientific assessments of biosecurity risk. No quotas. No tariffs.

It's for this that APEC has been described as the biggest trade policy initiative in history.

I'd say it is probably a more ambitious initiative than even the development of the EU.

Over one-third of all the people in the world live in an APEC economy.

It represents half of world production and half of world trade.

There is an extraordinary diversity of people, language, culture and economic development.

Major powers such as the US, China, Japan and Russia are all involved, and 17 other Pacific Rim economies.

And they are all publicly committed to the goal of free and open trade and investment in between 11 and 21 years.

To achieve that goal, economies develop Individual Action Plans, and other economies peer-review them.

I will spare you details of the process, but it has led to some good outcomes.

Indonesia, for example, has implemented its commitment to cut tariffs on food items to 5%.

China will cut tariffs on nearly 6,000 industrial and IT products to a maximum of 10.8% by 2005.

We also work on Collective Action Plans where issues are more common, such as principles for government procurement so that you have a better chance of supplying bureaucracies.

This all represents progress towards those 2010/2020 free trade goals.

But, at the same time, most APEC economies realise that in order to achieve the goals, we need to approach the challenge in more than one way.

That's why we are working to achieve early free trade in some sectors.

On forest and fish products, a lot of work's been done already. We've set a target of zero tariffs by 2004 for forest products, and 2005 for fish products.

That agreement is now going to the World Trade Organisation to get more economies involved and to become part of the WTO's rules-based system.

This year, our attention is turning to early free trade for horticultural and some processed food products.

And we are also working on a more comprehensive proposal involving free trade in food, called the APEC Food System.

All this work on trade liberalisation will progressively give you open access to all the economies in the region.

But, as the ice-cream example shows, that's not the end of the story.

Liberalising trade is not enough on its own. We need to facilitate trade as well.

A good example is our work to harmonise standards, so that you don't need 21 different kinds of ice-cream for the region, or spend time and money on compliance.

We're working to align electrical and electronic equipment standards among developed economies by 2004, and by 2008 among developing economies.

If you're a manufacturer of those goods it means in five years your New Zealand standard will be good for the US, Canada or Japan.

In nine years, it'll be good for Russia, Viet Nam or even Papua New Guinea.

I can get you information for when this harmonisation work is scheduled to begin in your sector, and I need your feedback on what should be priorities.

APEC is also working this year to harmonise Customs procedures.

It should become easier over the next few years for you to get your products through the ports and airports of APEC economies.

It should also be easier to get yourselves in and out of APEC economies with the APEC Business Travel Card scheme, reducing the need for visas and providing you with fast-track processing on arrival.

The benefits of these initiatives all add up.

With different standards and Customs procedures right now, it has been estimated that the average international transaction involves between 27 and 30 parties.

You need 40 documents, 200 data elements and you'll need to re-type 60 to 70% of all your data at least once.

That's according to the APEC Business Advisory Council.

In response, we politicians intend to cut paperwork down so that your transactions can be completed much more simply.

The next level of APEC work is focused beyond the border, on domestic economies if you like.

We call it strengthening markets.

At the most basic level, advice can be provided to improve competition in telecommunications, electricity and transport, to ensure a better and cheaper service.

It'll help get your ice-cream to the shops cheaply, without it melting.

There is work, which New Zealand is leading, on competition policy.

Our first goal is to get agreement on a set of competition principles to eventually achieve an easier, cheaper and more certain environment for business.

Other work will involve encouraging economies to put in place modern accounting standards.

Much of this work to strengthen markets is backed up by technical assistance to developing economies if required.

Economies may want to introduce competition law, for example, but they may not have the expertise to set up a Commerce Commission, or the lawyers or economists to staff it.

APEC's Economic and Technical Cooperation programme is designed to provide that kind of assistance, as well as upgrading entrepreneurial, industrial and technology skills.

It's good for those economies, and its good for us if they have better economic infrastructure and grow faster as a result.

APEC's programme is comprehensive, and I want to discuss it with you in more detail informally.

Remember, it's about improving prosperity through the region, by encouraging more business activity between economies.

If APEC delivers on its agenda it will directly benefit New Zealand exporters.

But it will benefit everyone in the region.

In the last 25 years, we've seen huge growth in trade throughout the Asia Pacific region.

As a result, more people have risen out of poverty, in a shorter period and on a greater scale, than in any other time or place in human history.

APEC will ensure that continues.

It will deliver huge gains not just to our ice-cream manufacturer, but to all the people of the region.

None of it will be easy.

None of it will happen as fast as you or I would like.

But it deserves New Zealand's fullest support, and your fullest support as businesspeople.