Sutton Speech - Meat Industry Association Agm

Sheraton Hotel AUCKLAND

8.45am, 12 September 2000

Good Morning, chairman Sir David Beattie, chief executive Brian Lynch, ladies and gentlemen.

As Brian said, it's been 10 years since I addressed you as minister of agriculture. I'm delighted to be back.

In the past 10 years, your industry has changed. I am delighted to see the shift from mainly frozen, bulk commodity product to chilled product, with a focus on branding and cutting edge technology all playing a role.

Change is continual. As you well know, innovation is necessary to stay ahead of our competitors. Investment in research and development is vital for that. That is one area of the McKinsey report that I have concerns about.

New Zealand must not fall behind our competitors if we hope to retain our place in the world.

Many of our scientists are world-class and I believe we must grasp every opportunity to develop cutting edge technology. Some of these must however wait till the Royal Commission on Genetic Technology has completed its work.

In the meantime, New Zealand meat companies and their associates are not wasting opportunities to increase market share.

New Zealand chilled lamb exports to Europe last year were up 21 per cent on the previous year, to almost 24,000 tonnes. I know from when I was in Paris earlier this year that our product is immensely popular, selling out in Parisian supermarkets even though it is four times the price of the local product. French people are noted for their good taste, after all.

Of course, such success can lead to cries for protection and French Agriculture Minister Jean Glavany and I had a frank discussion on such issues. He will visit Auckland later this week and I hope your representatives who will meet him on Friday can persuade him to adopt some New Zealand practices.

Even in the United States, that bastion of free trade, New Zealand meat also faces barriers, with a safeguard tariff imposed on lamb imports last year.

We are optimistic of a positive outcome from a World Trade Organisation disputes panel hearing on the issue later this year.

Barriers to our trade take up most of my time as both Minister of Agriculture and as Minister for Trade Negotiations.

Speaking with both hats on, I make no apology for New Zealand’s continuing reliance on agriculture-based exports. That is our comparative advantage. We can produce milk, meat, wool, timber products, certain varieties of fruit and vegetables, cheaper and better than anyone else in the world.

Since we removed all protection and price support from agriculture in the mid 80s, its contribution to our GNP has actually risen significantly, from 14% to 16%.

But we also need to get smarter at adding value to our primary products, something you all know about.

The other point is that we need to reduce barriers to trade, especially on agricultural products.

Because of the technical barriers to agricultural trade so prevalent in world trade, agriculture has also been at the heart of the New Zealand government?s trade liberalisation focus.

A few weeks ago, I concurred with the proposal to re-appoint Malcolm Bailey as our special agricultural trade envoy.

Malcolm's job is to engage directly with farmers and farmer organisations overseas to persuade them that life is possible without subsidies. A lot of Malcolm's time has been spent in Europe, North America, and North Asia. The feedback I've received has generally been positive.

I think it vital that we continue this effort in support of the Government's work at ministerial and officials level.

This year, I have asked the Ministry of Foreign Affairs and Trade to ensure that Malcolm has ample opportunity to meet with New Zealand-based organisations such as yours to ensure that our strategies and our messages are well-coordinated.

Whether it is manufacturing, agriculture, or services, I like to think that New Zealand is becoming smarter in our approach to trade liberalisation. That means taking a hard-headed look at what our interests actually are and taking practical and realistic steps to pursue them.

So what does a hard-headed assessment of our interests tell us? It tells us that our interests are strongly in favour of opening up markets for our exports - markets that are currently massively protected. It means strengthening the rule of international law - the only thing that stands between us and the law of the jungle on the world economic stage. Countries such as New Zealand rely on robust trade rules, fairly administered.

It means ensuring that our citizens see the trading system as part of a balanced approach that serves their interests and deserves their support. Too often, the only voices the people hear are the voices of commercial or other interests who want to reserve existing privileges.

It is pretty clear that there is an enormous amount at stake. It is also clear that the reason why there is such a huge potential for gain is because our agriculture and resource-based industries are at a disadvantage right now due to huge distorting interventions by our trading partners.

Last year developed countries gave away US$361 billion to their farmers. That?s enough money to pay for every one of the 56 million cows in the OECD to fly around the world first class with 1500 dollars spending money thrown in.

New Zealand exports face tariffs of well over 100 percent in many markets.

For 15 years we have been leading the world in unilateral tariff liberalisation. New Zealand has few tariffs left. At present, 95 percent by value of our imports enter duty free.

We are not going to backtrack from that.

However, we have announced a tariff freeze on the few remaining tariffs. The current applied rates will be held for a period of five years, and a tariff review to be completed at the end of 2001 will consider the future course of our tariff policy in the context of the government?s broader economic strategy. This will give the few industries that still have a small level of tariff protection a little more time to adjust.

More importantly, the tariff freeze will also enable us to undertake further tariff reductions on the basis of properly structured trade negotiations, which are mutually beneficial and under which our trading partners are also making reductions.

This government is taking an approach based on reciprocity, but fully in keeping with the APEC Bogor Goals - which means free trade by 2010 in New Zealand?s case. It is a commitment on the part of all APEC economies to open up. It meets our test of everybody playing their part in a balanced outcome.

It is argued that the best way to reduce barriers to trade is through the World Trade Organisation. But regional arrangements can be stepping stones to that. They can also play an important part in encouraging others to get into the game. At the very least, they can be pursued in parallel with multilateral negotiations in the WTO.

Either way, New Zealand remains absolutely committed to working closely with WTO members on the new agricultural and services negotiations already under way. And, of course, we want to see that folded into a broader negotiating Round.

Yesterday and today in Melbourne, thousands of people are demonstrating against globalisation and free trade.

They fail to take into account that globalisation is not something governments can choose to opt into or out of ? as the failed attempts by the former Albanian government and current North Korean government show. Rather, governments can only try to mitigate the negative effects and educate their citizens so they can take advantage of it.

This Labour-Alliance government is not into free trade. Rather, we are working on trade liberalisation. There is a difference. We want to regulate the international economy. We want there to be rules governing international trade, so that when big, powerful countries break those rules, there are procedures in place to bring those countries back in line.

We do not want a law of the jungle, might makes right situation.

I find it ironic that those in New Zealand who are most vehement about regulating the domestic market are among the most fervent against the rule of law in the international market.

Trade liberalisation ? enabling countries to sell what they do best in as untrammelled a way as possible so that citizens can improve their living standards ? is what this Government is working towards.

Any responsible government whether developed or less developed wants to improve the welfare of its people. That is after all what trade liberalisation is about. It is not there for its own sake.

New Zealand believes all nations must share in the wealth that trade can generate.

Studies suggest even a halving of trade barriers around the world could add gains of three to four percent to the GDP of developing countries. Even if that is not mathematically precise, I think it gives a pretty good idea of what is broadly at stake.

Of course, that does assume that all countries are prepared to dismantle their trade barriers - and smaller countries such as us know how difficult it is to get the large developed economies to agree to do that. But the lesson I draw from that is that we have to keep the maximum pressure on. New Zealand has clear objectives on agriculture. We will pursue the elimination of export subsidies, deep cuts in agricultural tariffs, large increases in tariff quotas, and an end to trade distorting domestic support. And we need a Round to make it happen.

We have also made it clear that we are ready and willing to negotiate economic partnerships with other countries - or regions - where that is to our mutual advantage.

This is underlined by the announcement three weeks ago of agreement on a closer economic partnership (CEP) between New Zealand and Singapore.

The CEP is important for a number of reasons. It is a comprehensive ?state of the art? arrangement which covers trade in goods, services and investment.

The CEP's direct impact on the meat trade will be limited because Singapore's tariffs are already at zero, but the agreement does contain commitments on export subsidies for agriculture ? hardly an issue for Singapore ? but an important signal to our other trading partners nonetheless.

The CEP will certainly have a positive impact on New Zealand/Singapore trade in goods and services and will encourage investment in both directions. We also hope it might also prove to be a catalyst for other agreements of a similar kind, starting with the countries of the ASEAN free trade area.

The Australian Centre for International Economics has estimated that an AFTA/CER FTA would be a win-win proposition for both groupings of countries.

The overall gains from forming such a free trade area could be in the region of US$50 billion over the period 2000-2020, shared between AFTA and CER.

I am personally excited by the idea of a trade agreement linking CER with ASEAN. It would have political as well as economic advantages. It would cement in the very close relationship New Zealand and Australia enjoy with ASEAN and would link our economic futures even more closely.

What these initiatives tell us is that progress outside a WTO round is possible, even if getting a round underway as soon as possible remains our key objective.

I think it is fully possible to do both ? to walk and chew gum at the same time, as an American official once said.

We must devote our full attention to the WTO. We must also pursue other bilateral or regional alternatives where the opportunity exists. Not to do so would be nothing short of negligence. I might even be accused of having rocks in my head!

I like to think that such initiatives where successfully pursued would mean tremendous opportunities for people such as yourselves, New Zealand exporters who have proved themselves in the past.

In closing, I would like to thank Sir David Beattie for his work during the past 13 years as MIA chairman. There have been times when this was not an easy job. But the meat industry is a crucial one for New Zealand and I thank Sir David for all his efforts.

Thank you.

Office of Hon Jim Sutton

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